Parenting Grown Children: What Dr. Spock Forgot to Tell Us

Money Matters: Is a loan a gift when we help grownkids buy a house?

Whenever we talk with friends about grown kids and money, one connection is a constant. Almost all of us have helped or plan to help our children buy a house. We're the generation that was lucky enough to buy our homes before the infamous bubble and whose overall estates have benefited from the pre-2008 relentless climb in home values. The climb has been such that many of our children, successful though they may be at this point in their early careers, can't afford to buy a house. And we want them to have one: Not just as a shelter, but as a solid financial investment. (Yes, we still believe those days will come again.)

When we do extend that helping housing hand, it tends to fall into one of three forms: an arms-length deal in which money for a downpayment is loaned and repayment is expected; a loan that's not-so-arms length and will be repaid when the house is sold; a loan that's really a gift that comes with no strings attached. (There is a fourth form--or so I've heard: Some buy the house outright for their kids. They put up the downpayment and pay the mortgage fees. But that seems a whole 'nother category of house "loan.")

Here's the story in stats, from a 2010 survey by the National Association of Realtors (Profile of Home Buyers and Sellers): 27 percent of first-time buyers who made a down payment received a gift from a friend or relative, typically their parents; 9 percent received a loan from a relative or friend.

For those 27 percent who give housing help as a gift, the survey includes some non-economic factors to consider: either don't attach any strings or declare upfront what those strings are. They can be anything from eventual repayment of the "gift" (which makes it more of a loan) to calling home more often. Not sure how well that latter point works.

Money Matters: A calculus underlies loans to adult children

The question was as abrupt as it was surprising: "Do you help your kids out?" It came from a friend we've discussed money matters with before. Our answer was as brief as it was open-ended: "We do, but it depends."

The friend who asked the question, says he does not. "I believe in fostering independence. They have to stand on their own two feet." And yet, it's more complicated than that--for him and for us.

The issue that prompted his question was a recent request by his married daughter--a mother of two and a lawyer who has opted not to work full time. She had called dad and asked him for $1,000 to cover the costs of a trip to Los Angeles to be with her best friend whose mother had just died. Dad declined. "It would be nice for her to go," the dad told us, "but this is something she should pay for herself. My wife and I worked hard for our money"--dad and wife retired a year ago--"We're comfortable but we don't have that much."

Paterfamilias chimed right in. "It's not an emergency, it's not something she absolutely needs. I can understand turning her down."

The dad then went on to say he had just lent his son money to buy a boat. A boat! The son is prospering in his job and has long dreamed of owning a boat. He asked his dad for a loan so he can buy it now. A boat may have more physical substance than a trip to L.A. but it's not exactly a necessity. And could clearly fall under the category of something he should pay for himself. And yet, dad said yes, no hesitation. Why? The son has borrowed money from dad before; he has always paid it back--on time and in full. The daughter, it turns out, has also borrowed money from dad--and never paid it back. Her requests for money come with a sense of entitlement--at least that is the way dad interprets the requests.

In effect, dad is applying a business-like calculus to his children's requests for financial help: A loan, yes, but only if the credit rating has been maintained. A gift, maybe, depending on what it's for and how good the credit standing is.

Our calibration is slightly different: different children, different situations, different attitudes. Ours don't ask for help. It's only when we learn about a need that we pitch in. And we try to do it subtlely. Sometimes it's couched as a loan; sometimes, as an outright gift. But beneath it lies a similar calculus: How responsible are the life choices they've made? They may take a financially risky course but a responsible one in terms of doing something worthwhile. If that creates a fiscal need along the way, we'd rather help them out now then leave it to them later. But the bottom line is similar to that of our friend's: We need to feel they have a sense of responsibility and accountability. We wouldn't feel good about lending or giving our children money if we felt it would be frittered away on, say, a sports car or a Prada purse. Not that grown children don't have a right to those things--they do. But only if they can afford them on their own.

The conversation reminded me of a scene from a PBS version of Jane Austen's Mansfield Park: A married daughter runs off with another man, to the shock and opprobrium of her family. The father--wealthy man, of course; this is Jane Austen country--is livid. He refuses to welcome her into his home--but he will see to her comfort. For him, as for many of us a century later, however much the calculus swings against a grown child, we aren't going to let them face life's crueler side if we can afford it. Unless letting them face it is the only way they'll grow up.

Re-nesting: When the grown kid moves home for the long haul

The tough economic times keep on coming on. If the downturn hasn't hit us directly, it may have hit our kids. They may need a safe harbor while they job hunt, reassess their life's plan, pull their post-college lives together. No one has the magic formula for making the move back home work. But here's some realistic advice--most of it the usual stuff-- from a recent blog:  

Starting with attitude, there's this reminder: "When the kids come back home, there's no doubt that there's an adjustment for everyone. Parents suddenly have a full nest. Kids don't really want to be back home, but need to be - at least for awhile. Individual roles shift and conflicts occur."

Seven Tips to Remember:

Recognize that the situation is only temporary (if it is).

Set some mutually agreed upon guidelines and parameters for successful cohabitation.

Share chores and expenses.

Consider each other as friends / roommates and behave accordingly (as much as humanly possible).

Spend some quality time together to build on the positives in the relationship.

Share your lives with each other to build trust and understanding.

When conflicts and/or resentments start to build, talk them out in a cool and rational way. Above all – treat others as you would like to be treated."

Money Matters: Who pays for what when the kids move back home

When Shari's son, daughter-in-law and two children moved into her house, they had, financially speaking, nothing. The cookie business they started together had failed--despite infusions of money from the family. So when Shari and her husband Hal opened their home as a refuge--"a lifeline" she calls it--money was an issue. "We could have subsidized their rent," Shari says of the decision to have the family move in with her, "but their needs were so far above and beyond that. They needed food, medical insurance, car insurance, clothes--the works." Shari and Hal were fortunate to have the wherewithal to pick up the tab for the big things, but what to do about "walking around money" while the son and daughter-in-law were job hunting?

At first, the four adults held Sunday night meetings: to go over any unmet needs or frustrations; to keep Shari and Hal up to date on job interviews and other employment prospects. Once it became clear what some of the day-to-day cash needs were, Hal came up with a plan. Every Monday morning they would leave Shari's son a check that was big enough to cover lunches, car fare, outings with the kids, other incidentals for both the son and his wife. That way, the younger couple wouldn't have to ask every time they needed something. This was important to Shari: "Money can be very divisive," she says. "It can be a wedge." She didn't want her son to feel demeaned by his circumstances, that he had to ask his Mommy for money to meet a friend for lunch or take his kids to the movies. And there was this: she didn't want either her son or daughter-in-law to rush into a job that wasn't on a career path.

It helps when you can afford to be as generous as Shari and Hal were. But the important point, to me, was not so much how much they could give and how many bills they could cover, but the open way they communicated. Talking things out--being up front about even the most personal money issues--can ease a tricky financial situation. And for Shari, setting a clear goal--jobs for her children that were on a career path--helped her formulate a plan she could live with and not resent.

Share the Wealth: To help our children now or to leave a legacy later?

Paterfamilias and I have been incredibly lucky. We've had good jobs and rewarding careers--to the point where we have been able to set aside enough padding for our retirement--and a little bit more. It's that "little bit more" than wiggles and jiggles inside my brain and bank account.

If we have "a little bit more," why not share it with our grown children in the here and now? Not to spoil them but to step in when there's a crisis or a need. And to let hem know in advance that should they need help, we've got their back. If we can afford it. We see nothing wrong in that. But recently, I've been doing some research on the question and that has raised some doubts about how good a practice this is.

One book by a psychologist suggests that to keep on offering money both spoils grown children and infantilizes them. It's a way to control the kids by keeping the apron strings tied to money. He suggests we who offer cash are suffering from affluenza, that our financial parenting has run amok.

I took all that to heart, but then i read an online story that interviewed several psychologists who all tsk-tasked the idea of helping kids out with money. When questioned about their own personal practices, however, all admitted to being guilty of helping out or indulging their grown children.

is this a case where common sense and best psychiatric advice differ?

And does it all come down to what we're comfortable with, what makes sense for our particular children and their behavior. If they aren't dependent and don't make constant demands and suggest they expect your help indefinitely, then why not help out on an as-needed basis? Isn't this a case of no harm no foul?

Money Matters: The long arm of parents who help their kids.

"We are spending so much money on our kids," a friend tells me. "They need to be rescued every once in a while."

The kids in question are hers from her first marriage and his from his first marriage. One of her sons went through a painful and devastating divorce, including court battles over child custody and support. He lost his job. My friend, her husband, her other son, the father of her son and an uncle all pitched in to help the divorced son. It took several years before he was back on his feet. And now his eldest son--one of my friend's three grandchildren--was ready for college. He had to choose not the best school he got into but the least expensive one. My friend and her husband dipped into their retirement savings to pay tuition--her son couldn't afford it and neither the ex-wife nor her parents (the other grandparents) were willing to help out.

My friend could live with the choice of the lesser school. That's life. It made her angry that the other grandparents weren't willing to help. That's life, too, but more emotional, verging as it does on fairness.

Now, she's got another financial anxiety: Her stepson--a man in his late 40s--has always been self supporting and single. And has always been shy around women. So, when he started dating a woman his age and then announced he was getting married, everyone was thrilled. But the new wife came with old and huge debts from her life with a former boyfriend. The new husband is helping his wife pay off those I.O.U.s--the credit card debt keeps compounding like crazy--and now everyone's helping out. It's another drain on my friend's dwindling retirement resources.  

"It never ends," she says. "It seems like one of our kids is always having a money crisis." A few years ago--just before he retired--my friend's husband paid off the mortgage on their house. "So we are lucky," she says. "What would we do--how could we help our kids--if we had a $2,000 a month mortgage payment to meet?" It also raises the question of how long you help out your grown kids. When does the rescue line end? And maybe even more to the point: How do you define crisis?

Does it help to know she--and by extension we--are not alone? The Brits are experiencing similar pressures. Here's a news story I just came across. In Great Britain, "millions of grandparents are cutting back their spending because they feel under pressure to fund their grandchildren." Research also found that the majority of grandparents regularly spent cash from their retirement savings on clothing, toys and other treats for their grandchildren. Others helped pay for essentials, such as shoes and school uniforms, to help their own children balance their finances.

Here was a key finding that hit home: "Although some children did ask their parents for financial help, much of the pressure to provide for grandchildren comes from the grandparents themselves." 

Money Matters: Helping kids with big purchases

When it comes to money, we're all over the place--tight-fisted to spendthrift; controlling to reckless; obsessed to careless. When it comes to our kids, it's even worse. It gets emotional, often reflecting where we've come from in our own lives.

Here's what I mean: A friend of a friend is a very successful and high-profile lawyer--a millionaire many time over with a big house and many expensive cars to his name. And he did it by himself: Started with almost nothing and slogged his way through to his current position of power and affluence. That, at least, is the routine he has always given his sons when he tells them he will not help them out financially--no loans to buy a car, a house or pay unexpected expenses. When they were heading to college, he insisted they work their way through. His message: They should work just as hard he did. He doesn't owe them anything.

This is not to suggest he isn't a loving father. But he draws a tight fiscal line and has yet to cross it. I've written before about those of us who prefer to use our hard-won money to help our kids out--to see them enjoy in the here and now the relief our money can bring. But we also have friends who say, we put our kids through college and that's it; we don't intend to help them with anything else--not that they can't afford it; it's a principle. It's an issue I've visited before on this blog.

It may get down to something as basic as our life experiences. If our parents were generous, we may have that model and want to be generous as well. Or, if our parents were fiscally restrained, we may decide we don't want to follow that path. Or perhaps they were generous to one of our siblings and that brother or sister squandered the money and our inheritance as well. We might want to be more cautious in the help we offer our children or the strings we attach to that help.

If you have the money to do help your grown children, where do you draw the line? Or are you all or nothing? Some things--help with paying off college loans, perhaps--but not others? And how do you come to your philosophy of giving?

Money Matters: What happens when you can no longer help your kids?

A friend tells me this story: His friends--a couple who retired last year--have a son living in Florida. He was in the construction business but Florida's economy--and particularly the home building business--is in the tank right now. Long story short: The son lost his job. The parents, who had done well during their working years--have been paying his mortgage so he won't lose his home. But their 401k took quite a hit in the Great Recession. Their investment income is down. And now they are talking to their son about how he might have to let his house go.

It's a painful conversation to have. Many of us who built up comfortable nest eggs during our working years are feeling pressed to have the kind of retirement we thought we'd have. But this takes that worry up a notch: What happens when our children run into trouble? Many of us have always assumed--not necessarily articulated but it was there in the back of our minds--that we'd be able to help our kids through tough times. But now the tough times are prolonged and the foreclosure problem deep. For many of us and for many of our kids, there's no relief in sight yet. At what point do we say, 'Sorry. We can't help anymore.' And not be crushed by it.

Your Money and Your Kids: Are they counting on a legacy?

At dinner with friends, paterfamilias mentions that his children--that's our grown children and their spouses--have told us, 'Spend your money; travel and enjoy yourselves; don't save it for us.'  In a way, he's bragging just a little bit. He's saying, in effect, his kids are doing well and don't need our help.

Our friends--she's a "new" friend, having just moved in with him, who's an "old" friend--laughs and says that's not what her children are saying. They're telling her: "Save some money for us. Our father [her former husband] is spending it all on his new wife."

We all chuckle over that. But neither of these dialogs deals with the real world--at least the real world I'm experiencing. Yes, I'm going to enjoy some of the money we've earned over the years, but yes, I'm also going to save something to leave for my children and grandchildren. Or, if I don't leave it, it will because they've already gotten it: either I've lent it or spent it--to or on them.  But even with that lend-or-spend attitude, I hope there's a small legacy for them [if old-age medical needs don't get in the way; how enjoyable a spend would that be?]--something to help the Grands through college or for my children to do something they've always wanted to do or just something to haveif there's an unanticipated need.

And I think that's what our friend's children are, in effect, saying. "We want to know a safety net will be there if we need help with some major expenses." Ours aren't articulating it because they still have the safety and stability of our Being Together as the same old us. We're not jetting off to a second youth or off on some other kind of spree. They can afford to say they don't care about a legacy, but it's not because they may not need it. That's a pretty comforting feeling for us--and maybe what paterfamilias was getting at by raising the subject at dinner with friends.

Lending Money: What to do when your adult child needs financial help

 These are hard times. The Great Recession is taking its toll--not only on our 401ks but, for some of us, on our jobs and worse, our children's jobs and financial well-being. Just to put things in perspective, a recent survey by Fidelity Investments found that 41 percent of U.S. households did not have emergency funds sufficient to cover three to six months of living expenses. What to do if your child runs into trouble and needs some money to tide him or her over? Here are some pointers from financial and other experts:

First point: Can you afford to make a loan? Here's the measure Ira Bryck, director of the University of Massachusetts Family Business Center, uses: "It's the same rule as gambling: Don't loan what you can't afford to lose."

Point two: What's the loan for? 'lf your finances are at the edge, what they'll use it for can make a difference. If the loan is to launch a new business or buy a house, maybe it can be delayed; if it's to keep the foreclosure wolf from the door, maybe you'll want to stretch your own finances. The answer to point two can temper the answer to point one.

Point three: Sibling rivalry runs deep and can crop up when you least expect it. Will you be accused of playing favorites? Will the sibling in need by charged by brothers or sisters of draining their inheritance. It's your money to do with as you please but it might be a good idea to keep any assistance just between you and the kid in need--unless everyone's getting tapped for aid.

Point four: Do the math. Let's say your investments are earning 7 percent a year( don't' we wish!). If you're asked to loan $20,000 for five years, the real cost to you for sidelining that amount of money is $28,000. This is not to say you shouldn't lend the money--it may be a good investment if it lets your child finish school or buy a house, but it should be factored into the "what's the money for" calculus. Point five: Your needs count. If the loan tips you into financial instability, you may have to say no. There may be other ways to help.