How to Wisely Help Your Adult Children Financially: A Guide for Parents

As a parent, you want your children to succeed in life, and sometimes that means providing them with financial support. However, it’s important to make sure that the assistance you offer is both wise and sustainable so that it can benefit your child without putting your own financial security at risk. Here are some tips to help you provide financial support to your adult children in a way that is thoughtful, fair, and sustainable.

1. Evaluate Your Own Financial Situation: Before you provide financial support to your adult children, take a close look at your own finances to determine if you can afford it. If you are still working, consider how supporting your children financially will impact your ability to save for retirement. If you are already retired, think about how supporting your children financially could affect your ability to pay for your own expenses. Remember, you can’t help your children if you don’t take care of your own needs first.
2. Set Clear Terms: When you agree to provide financial assistance to your adult child, be sure to set clear terms and expectations. Discuss the amount of money you are willing to provide, the purpose for which it will be used, and the time frame for repayment. Consider putting the terms of the agreement in writing to avoid misunderstandings and ensure that everyone is on the same page.
3. Consider the Needs of Each Child: It’s important to consider the individual needs of each child when providing financial support. One child may need more assistance than another due to financial hardship or other circumstances. While it’s important to treat each child fairly, that doesn’t necessarily mean providing the same level of support to each child. Instead, focus on meeting the needs of each child in a way that is equitable and sustainable.
4. Don’t Sacrifice Your Own Financial Security: It’s easy to get caught up in the desire to help your adult children, but it’s important to remember that you have your own financial needs to consider. Don’t sacrifice your own financial security in order to provide support to your children. Consider other options for supporting your children, such as a low-interest loan or helping them develop a plan to become financially independent.
5. Consider a Reverse Mortgage: For parents who are homeowners, a reverse mortgage can be a way to access the equity in their home to provide financial support to their adult children. A reverse mortgage allows homeowners over 62 to borrow against their home equity without making monthly payments. The loan is paid back when the homeowner sells the home or passes away. While a reverse mortgage should be carefully considered and is not right for everyone, it can be a way to provide financial support to adult children without sacrificing the parent’s financial security.
6. Encourage Financial Independence: While it’s important to help your adult children in times of need, it’s also important to encourage financial independence. Rather than providing ongoing financial support, consider offering guidance and resources to help your children become financially self-sufficient. Encourage them to create a budget, establish good credit, and develop a plan for their financial future.
7. Consider Tax Implications: When providing financial assistance to your adult children, be aware of any tax implications. Depending on the amount of money you give and how it’s used, it could be subject to gift tax or other taxes. Consult with a financial advisor or tax professional to understand the tax implications of your financial support.
8. Focus on Education and Career Development: While providing financial support to your adult children, focus on education and career development. Encourage them to pursue education and training that will improve their earning potential and help them become more financially independent. Consider funding a certification or training program, or helping them with job search expenses.
9. Make a Plan: Before providing financial support, create a plan with your adult child that outlines how the money will be used and the terms for repayment. Be specific about the amount of money, the purpose for which it will be used, and the time frame for repayment. Having a plan in place can help avoid misunderstandings and ensure that both parties are clear on expectations.
10. Help Your Child Build Credit: If your adult child has a limited credit history or a poor credit score, consider helping them build credit. Co-signing on a credit card or loan can help your child establish a credit history and improve their credit score, which can help them in the long run.

In conclusion, providing financial support to your adult children can be a tricky proposition. While you want to help your children succeed, it’s important to do so in a way that is sustainable and doesn’t put your own financial security at risk. By evaluating your own financial situation, setting clear terms, considering the needs of each child, not sacrificing your own financial security, and encouraging financial independence, you can provide support to your adult children in a way that benefits everyone involved. And for homeowners, a reverse mortgage can be a viable option for providing financial support without sacrificing your own financial security.