Tag Archives: helping adult kids

Giving Cash to Your Adult Kids?

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.

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.