I’m a big fan of giving money to your adult kids. It allows you to be a blessing to them and to be able to help, where appropriate. But only if you can afford it, where it does not impact your lifestyle or emergency funds, and giving it smartly.
There’s an entire chapter in the Money Tools book entitled: If you’re the parent of a kid aged 4 to 40. It’ll explain how to help, and how not to help your adult children with money, to never cosigning any loan, etc. It’s a must-read for everyone with adult children.
In addition to that, there’s more you should do – or not do: Never pay off, or pay down their credit card. 80% of people run them right back up within a year. And, sorry, your kids won’t be the exception. Since they clearly can’t handle credit cards, they’re better off at the max so they have to stop using it. When they do pay it off, it’ll be really hard – and that lesson will last a lot longer.
You do have a right to designate the money. No, you’re not intruding. It is YOUR money and YOU get to have a say in how it is used! If you end up being wise enough to set conditions, give them a note outlining what you’ll do, because you’re not going to be just handing them a cheque Christmas day.
A blessing could be a fixed amount for a down-payment for a home. Or many families make it a match: We’ll contribute $5,000 when you have $5,000 saved up – just show us your savings account balance. Or it could be partial payment towards a vehicle. We’ll add a $3,000 down payment for a vehicle, or pay one-third or whatever of a good used vehicle that you can afford to pay for without financing.
For the non-adults, if you’re giving cash to the grandkids, the most powerful way is to make it an investment contribution. Your kids will just need to make sure your grandson or granddaughter have a Social Insurance Number and they need to open an investment account. With historical returns of 10% (yes, both the Dow and S&P500 did better than that even in a crappy 2016 investment year) the money will double every seven years. If you invest $2,000 for a 5-year old, it’ll be $8,000 at 19 when they go to university. $5,000 will turn into $20,000. If it’s longer term and for retirement, that’s 50 years the money can keep doubling and doubling: $1,000 turns into $145,000 and $2,000 today turns into $290,000 at retirement. THAT is a small present, set up correctly, and invested wisely, that you can’t beat.