Financial advisers tell us to squirrel away money for our retirement, and yet we spend it on our adult children--paying their cell phone bills, letting them live rent-free in our houses. Friends (especially those without children) are shocked (shocked!) when we give a grown child a lavish gift or pay one of their outstanding bills.
Yes, it may not make financial sense; it may run counter to a life-long parenting goal of our children becoming independent adults. Yet a recent outgrowth of economic thought understands why we do it: It has a whopping pay off. In short, it makes us feel good.
The slightly longer answer goes like this: When it comes to money, the getting and saving matter--how much longer we need to work; how much money we need to keep in an emergency account. But so do emotions. In the long run, they may overwhelm our rational judgment about long-term goals, but they also bring us happiness in the here and now. For some of us, there's a deep pleasure in paying off a chunk of our kids' college debt or car payments or offering a chunk of cash for the down payment on a first house. (For that matter, putting aside a chunk of money in an emergency account doesn't make all that much sense, but it does bring us comfort to know it's there.)
As parents we are more than a spreadsheet and by-the-book counselors.
In his financial blog Michael Kitces points to research and makes a point about money and happiness:
Yet contrary to the conventional wisdom that “money can’t buy happiness”, a recent new book entitled “Happy Money” by researchers Elizabeth Dunn and Michael Norton suggests that there may be far more opportunity than we realize to derive greater happiness by changing the ways we spend our money. How we spend – on ourselves, and others – really does impact the enjoyment and emotional well-being we derive.
In fact, the research of “Happy Money” suggests that sometimes, the best things we can do to improve our happiness may lie in not trying to maximize our wealth, but instead focusing on experiential purchases (rather than “stuff” that appreciates in value), spending money to buy time, and even spending money to support family and relatives instead of ourselves (which may not be cost-effective, but can be remarkably happiness-effective!).
For more on the the latter point Kitces raises, see my post : "Can we afford to share our wealth with our grown kids in the here and now? There's a way to measure that."