Helping Your Adult Kids Part II

 

As we discussed last week, if you want to help your adult kids, you need to be super careful. I know it’s hard to say no, but I also know your kids will try you first. Now, this is assuming we’re dealing with adult kids, not living at home, and you’re not the rich parents.

What’s scary is that many parents in the survey admit they’re delaying their retirement as a result of helping their kids – that’s insane! The $500 (average, according to the survey)  you give them each month is $6,000 a year. But it’s not that simple: That’s $6,000 you’re not putting into your RRSP. As a result, it can’t compound! $6,000 turns to $12,000 in seven years, to $24,000 in 14 years and $48,000 in 21 years. So if you’re in your mid 40s, you’ve lost out on almost $50,000 of money with that $6,000 you gave them. If you do not have the extra money – do not do it!

I am a big advocate of giving your adult children money if you have it. They will inherit it in any event, and it’s much better to see the benefits and monitor their behaviour with money. That’s pre-supposing that you have at least one or two million dollars in liquid assets to draw on for your retirement. Liquid assets are investments and don’t  include the equity in your home. After all, you can’t eat your house.

You should do it – but only do it when your adult child has a full-time job and is already financially responsible and living on less than they earn. If not, you’re just feeding and reinforcing their bad spending habits and they will never learn the lesson. Maybe it’s $20,000 for a down-payment, given your married adult child the money to have one partner afford to be a stay at home parent, or paying off/paying down their student loans. That’s after you have seen at least a two year track record of on-time payments.

If you still have teenagers living at home, please start the money talk. It’s not a one-off conversation – it’s a lot of small conversations for years. Show them your $2,000 credit card bill, show them that it has right on the statement it’ll take 25 years to pay at minimum payments. Show them a basic budget of food, rent or mortgage, utilities, gas, insurance and all the things they had no idea actually cost money!

Tell them early and often that they can count on $2,500 (or whatever your fixed amount is) when they go to university or college. How would they get the rest? What kind of part-time job would they think they’d have? Could they get a bunch of scholarships? Would they live at home?

You need to take care of yourself before you can take care of others, and that includes your adult kids.

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