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

Money Matters: Should a financial gift come with strings attached?

We are a generation that wants to--especially if we have the wherewithal to--help our kids out financially. Whether it's a gift to assist with the downpayment on their first house or money to pay health insurance premiums, we're often very generous with our grown children.

Whatever the reasons behind the gift, there is always a question of whether they do with it what we intended. That is, if we hand over a chunk of cash to pay down their car loan, will we be angry if they use the cash to buy new clothes.

In a recent Social Qs column, Philip Galanes answered a reader who told Galanes she often sends her brother and sister-in-law, who were living in financially tight circumstances, a check "to make their lives easier." Her aim, she explained, was to make sure they had money for emergencies; that her largesse would, in effect, be put aside as a safety net. But when her brother called to thank her for a recent gift, he mentioned that he and his wife had used it to travel to Europe. Her question--and one that applies directly to those of us who are financially generous to our grown children--was, how could she make sure, without dictating how they use the money, that they use it responsibly--at least responsibly in her eyes.

Galanes's answer is a practical one for those of us who struggle with the same or a similar issue:

There is nothing wrong with calling your brother to say: “Please tell me to butt out if you like, but I worry about your financial security. If you ever have an emergency and can’t pay an essential bill, please let me know, and I will try to pitch in.” From a distance, this seems to be what you want to do: help protect them without becoming their bank or fairy godmother.

But to continue giving them money and then feeling resentful when they spend it differently from how you imagined, isn’t fair to any of you — particularly given your hazy sense of their financial condition and prudence.

In other words, we can tell our kids there's a string attached to a particular gift--paying off of a car loan, say--and hope they use it that way or we could pay off the loan directly. No point building up resentments over gifts: they're supposed to be joyful and helpful not a sourse of future ill will.

Blessed are those of us who are able to give the gift and trust our children to use it as they see best.

painting: Picasso

 

Money Matters: Grown children and the financial intelligence gap

A letter to a financial expert asking for advice about an inheritance was not your usual request. The question came from a woman whose father-in-law left her 29-year-old daughter---his granddaughter--a sizeable fortune in a trust that was currently being managed by her daughter's father. When the daughter reaches 30, however, she is eligible to manage the trust herself. Few of us are in the situation of being the parent of a child who is inheriting a fortune.  And yet, though the sums of money may be significantly substantial, the issue this parent faces is one many of us worry about: Will our grown children be able to handle financial responsibilities if we're no longer around to help them. How do we prepare them?

If you're interested, you can read here the expert's advice on helping the daughter understand her financial challenges and choose an adviser to manage the money.

But the expert's advice on preparing a child to be engaged in and understand how to handle financial responsibilities applies more universally. Here are some points Quentin Fottrell, who writes as the Moneyist, makes:

Encourage them to ask questions:

Unless your daughter builds enough financial confidence to ask questions and learn about how she can invest her money, and trust her instincts and establish her own risk tolerance when it comes to investments, she is vulnerable to another person stepping in and filling your husband’s shoes, particularly when he is no longer around to help.

Let them make decisions:

Trusting your daughter to make the right decisions is part of her growing up....The best you can do is to lead by example, and — I’m with you — part of that is allowing her to make her own decisions, as you and your husband have done with your own lives.

Talk things over with them:

Bottom line: You want your daughter to become an active decision maker, even if the answer is to do nothing for now; learn the basics of investing so she knows what questions to ask; and not hand her fortune over to one person to make decisions without her knowledge or understanding. It’s her money, after all.

The first step is for you both to sit down with your daughter and include her in these conversations. You will discover that you will all learn from one another.

painting: Marinus Van Reymerswaelle, 1539

 

 

Money Matters: When sibling rivalry crosses the helping hand

Many of us take great pleasure in helping out our children financially. If we have the wherewithal we're likely to help them with a downpayment to buy a house. (Roughly 20 percent of U.S. homeowners received gifts or loans to help them buy a home, according to Money Magazine, and most of that money came from us--parents of grown children. Money Mag tells us that if the “Bank of Mom and Dad” were a true business, it would be the seventh biggest mortgage lender in the country.)

There is at least one hitch to all this Mom and Dad banking. If we have more than one child, they can get ensnarled in bad feelings--toward us, toward each other--over money we've given one child and not the other or others. The business of giving them what we might call "an advance on their inheritance" can be trickier than writing a will. With the 'advance on inheritance" we're still around to feel the sting if one child feels favored over another.

In a letter to Philip Galanes and his Social Qs column, a reader was feeling that kind of slight.  Her parents had let her know that they had given her sister "a chunk of money to help with a down payment on a house." They told her she wouldn't be receiving a matching sum and for a rational reason: The writer and her husband already owned a house, which they were able to buy with a generous gift from his parents. "My parents aren’t wealthy, so I understand their decision. Still, it stings!" From her perspective, the money they gave to her sister signifies that the parents love her sister more than they love her.  The writer wants to know whether to raise her grievance with her parents.

Galanes reminds the reader and all of us that the parents’ money is theirs. "Whether they are fabulously rich or just squeaking by, they can spend it however they like. And adult children have no entitlement to it."

Over and beyond that, Galanes acknowledges that "sibling rivalry for parental love can be painful" and that the writer should talk to her parents about their decision. But his final reminder in this family drama is one we should all take into account at gift giving or will-writing time:

And for parents: If you intend to make unequal gifts, it can be helpful to discuss the issue in advance. Feelings about parental gifts can run strong!

We are free to do with our money as we see fit. We don't owe our children anything now or in the future. But that's not really the point. What we do owe them is a sense of fair play--an explanation of why we've chosen to do as we have and why, especially when we choose to help one child and not another.

painting: Rothko, Untitled

Daddy Indulgence: If we're guilty of over-helping our young-adult children, is that bad?

Scratch someone who doesn't have children and they'll probably tell you: Too much. That would be in answer to the question: Do parents do more than they should for their adult children. I had a single co-worker who dubbed my husband "Daddy Indulgence" for such "crimes" as paying for our children's college tuition. (We had saved up for it for years.)

My co-worker's teasing was good-natured. (She hoped our kids appreciated the gift.)  But still, the "daddy indulgence" trope persists as a reflex reaction.  There's a reason for its apparent growth recently: Although our children's march toward financial independence moves forward, it's doing so at a slower pace than our generation's.

According to a Pew 2019 survey, financial independence is

"one of the many markers used to designate the crossover from childhood into young adulthood, and it’s a milestone most Americans (64%) think young adults should reach by the time they are 22 years old....But that’s not the reality for most young adults who’ve reached this age.

The reality is: In 1980, roughly one-third of young adults were financially independent by the time they hit age 22; in 2018, that was down to one-fourth. When Pew looked more broadly at young adults ages 18 to 29, though, the survey found financial independence has been largely stable in recent decades, with women closing a gender gap.

There are other markers that suggest our adult children are less independent than we were. Here's Pew again. (This was based on a 2019 survey in those halcyon pre-pandemic days; Covid-19 has likely skewed a lot of the numbers and not in a positive direction):

 Today’s young adults are staying in school longer and are marrying and establishing their own households later than previous generations. A growing share are living in their parents’ homes well into their 20s and even early 30s. (See this Parenting Grown Children post.) Some of these changes are linked to economic challenges, while others may represent a realignment of goals and priorities.

As to the indulgence side of the equation, the Pew survey found we were helping out our kids with the basics-- groceries and housing--plus tuition. 

Aside from the question of whether these 'indulgences" augur good or ill for our adult children, where does the finger of blame point? Pew is quite unequivocal: The majority of the public says, as my co-worker teased, parents do too much for their young-adult children and most parents of adult children disagree.

How do our kids feel about the aid and assistance? Pew asked that question as well. Turns out we're in sync with our kids on this one:

Young adults themselves are largely satisfied with what their parents are doing for them. A majority (65%) say their parents do about the right amount for them – similar to the share of parents of young adults who say they do about the right amount for their kids.

 

Should we reboot the tough-love rules on loans to our kids during the corona crisis?

As we welcomed in the new year of 2020, our adult kids were on a steady financial path: working, paying their rent, fiscally independent. Or they might have been in mid-struggle but showing promise. Then along came the coronavirus pandemic and its devastating effect on the economy. Our adult kids may now be in financial trouble. Some have moved home to shelter with us--and to save money on rent. Some are keeping their physicial distance but asking for tide-over loans.

Should we apply the same rules to helping them out now as we did pre-disaster? Is the Coronavirus crisis a time for stronger-than-usual doses of compassion?

To judge by anecdotes that are on the loose in the media and statistics from Pew, whose pollsters follow inter-generational issues, most of us are welcoming--or allowing--our grown kids to move back in with us. More about that fiscal helping hand in a future post.

What about a loan to help them survive during a failing and flailing economy? According to a survey by Commonwealth taken in the relatively optimistic days of April,  more than half of Americans are worried about the virus’ impact on the economy and their financial lives.

If one or more of your grown kids needs help in these extraordinary times, here are some points to pop into the decision hopper:

A run on the Bank of Mom and Dad. That is, one of your grown children could ask for a loan that's a reasonable request and that you want to fill. But our finances have their limits. Are there other children or close relatives--a brother, a parent--who might need help as well. A loan should be seen in the context of how much you can afford to lend and how many key borrowers might have needs.

Lower expectations. You may want to make the loan a loan--not a gift. You may even write out a loan agreement with interest rates and repayment schedule attached. But gird yourself for disappointment or, better case, lapses. These are truly hard times, even panicky ones for those who don't have money in the bank but do have a family to raise--even if income has been reduced or jobs lost. Unexpected expenses and setbacks happen.  If we're the ones with resources that can survive a hit, we may not like it but we should be prepared to realize the hit may be permanent. Here's a word of advice from a financial counselor: If it's a loan and not a gift, formalize it with a note about terms and then let it go. "Don’t bring it up at holiday dinners. Don’t give reminders. If you can’t do that, we suggest you not make the loan at all.”

Guarding against a default. Repayment is a bigger issue than ever (see above) but if you've been more generous than you can afford to be and this is money you absolutely need repaid, let your borrower--your grown child or other relative--know the financial reasons in detail. It helps to share why you need this money back, what it has been earmarked for, what setback you would face if the money isn't repaid. Nothing beats communications and transparency.

 Sibling rivalry's ugly head. Lending money to one child  may make the other feel left out, or loved less, or that their eventual legacy from you is being diminished. They may figuratively stomp a foot and whine, "It's not fair!" All kinds of ugly thoughts and emotions can rise up and strike our kids.  Which is not to say such behavior should be honored.  Instead, try a pre-emptive strike via communication about why you're doing what and how it will or will not affect the non-borrowing child. It won't hurt to mention the stress we are all under during this national crisis.

A grudge against your spending  habits.  If they're in need and have to pay you back--or if you decide not to help them out--resentments about how you spend your money can pile up. They may point an accusatory finger at your going on a covid-safe vacation or buying a new car.  What do the experts advise? It's your money to do with as you wish. But you might want to reassure them you're not going to let them starve.

 

 

Observation: Philip Galanes on keeping indulgent gifts to grown-up kids on the down low.

When our children were just starting their careers and in the midst of struggling to meet their rent, cell phone bill and car payments, we may have helped out--a car payment here, a refilled refrigerator there; dinner out or a new sweater in just the right color. If we could afford it, we enjoyed doing all that and maybe a little more.

But there comes a time when it's counterproductive, when it makes our grown children feel like they aren't independent adults.  In asking Philip Galanes in Social Qs what to do about parental overindulgence, a reader (a young woman in her 30s) described how it made her feel when her parents "keep buying things for me and my kids (groceries, toys, clothing) and refuse to let me pay for anything. I've told them we don't need gifts, but they ignore me. I feel awful."

Here's the advice Galanes handed out in how to deal with us--the parents who aren't giving our adult children the gift of acknowledging they are grown up and self sufficient adults.

Sit them down one quiet evening and say: “It’s largely thanks to you and your unwavering support that I’m in such good financial condition for my age. I hope you know that. And I think it’s time we put our relationship on more equal footing.”

Then, depending on your means (and inclination), buy them something you know they will appreciate: new winter coats, a gorgeous filet mignon from the butcher or a sunny weekend in Coral Gables. No need to become a spendthrift. Just try a loving gesture. It may wake them up to your well-founded gratitude and the true financial picture here.

This doesn't mean we can't pick up the check for dinner or surprise them with a beautiful sweater. It's just that it should be an occasional treat, not a habit.  And we should let them treat us occasionally too.

Money Matters: Two tips about lending money to adult children

You've heard it--I've said it--over and over: It's a tricky and emotional  business lending money to adult children. We want to be helpful--if we can afford it, and sometimes even if we can't. But we worry about why they are unable to manage on their own. That said, financial advisers speak as one  in saying that if you do lend money to your grown children, do it like a banker would: review their financials; set the repayment contract in writing.

Ah well. Seems like such a cold thing to do when it's your loved one. Michele Singletary, who writes a syndicated personal finance column, also hands out that "get it in writing" advice, but her recent column on the subject of loans to adult children made two points about that lending process that may clarify your perspective:

On the importance of reviewing their finances:

Upon review of bank statements, you may find evidence that your adult child is living above his means, such as eating out a lot. Don’t lend money to people who earn enough to cover their expenses, but can’t because of mismanagement. That’s not helping. That’s enabling bad behavior. Why should they enjoy the fruits of your frugality while they are living it up?

On the need to find out why they're tapping the bank of mom and dad for loans:

This is not about being hypercritical of their lifestyle. Just because there’s a request doesn’t mean there’s a need. Perhaps your adult child is underemployed. Maybe your daughter and her husband bought too much house and need to downsize. If your adult child is constantly asking for loans, there’s probably an underlying situation that needs to be addressed. Your handing over money all the time prevents this analysis.

Money Matters: The Wisdom of the Crowd on loan versus a gift to adult children

Okay. So crowdsourcing wisdom is just another way of saying Reader Comments on an issue that cuts close to many of our hearts and pocketbooks. Often, though, those comments are more than passing remarks. They carry kernals of wisdom based on years of experience. So here is commentary from my readers responding to Michele Singletary's advice on when to cut the financial aid to adult children and from those who responded to a New York Times article calling for tips on managing household finances--with loans/gifts to family members eliciting commentary from two readers. 

First up: General advice from a New York Times reader on financial assists, whether it's your kin or someone else in need:

“If you do give money to someone, you have no right to dictate what they do with it....This principle works for all kinds of donations. If I decide to give money to a family member, a person experiencing homelessness, or an institution, I have decided to trust their judgment, and I never think about it again.”

From a Parenting Grown Children reader responding to Michele Singletary's comment that, if you give to an adult child, the giving should help push that child toward financial independence:

"I like the quote from Singletary. Every child and every situation is different. We can cut those cords but sometimes we need to tape them back together for a short while in order to keep our children making forward progress."

While this reader doesn't address lending money to adult children per se, her comments could apply across the board. She wrote to the  New York Times to say that when she was 10 years old, she lent a nickel to a classmate in Sunday school, and never got it back.

“I decided that I would never loan money to anyone again. I’m nearly 65 and I’ve kept my vow. I only give money away. I let people know it’s a gift and nothing is owed, in any manner. And I do it with a smile and graciously.”

Observations: Michelle Singletary on when to cut an adult child's financial cord

I am not the only one writing about the helping hand versus tough love. Or how to find, as Michelle Singletary puts it in her Washington Post column, The Color of Money,  "the balance between protecting our children and letting them learn the hard way."

She does not--as I do not--have an all-purpose, one-answer-fits-all solution. It depends.  She writes about hearing from readers who are helping pay down their children's student loan debt and opening savings accounts for grandchildren ("We do not see this as an umbilical cord, we see it as an investment in their future.")  and another reader who is supporting a child while he gets his PhD ("He'll get the money sooner or later, and he might as well get it when it will help the most.")

To be sure, it is not all "thanks and I'll pay you back on your investment in me." There are times when we might not hand over assets. Some kids exude an unpleasant air of entitlement, which could be a signal to tighten the fist. And, of course, not all of us can afford to be as generous to our kids as we would like to be. 

Affordability aside, here's where Singletary comes down on the financial aid question:

Wherever you draw the line, take a step back and make sure you’re pushing your children toward being as self-supporting as possible.

Money Matters: What If They Ask Us for an Advance on Their Inheritance?

Many of us--well, those of us with the wherewithal--are inclined to help out our grown kids in the here and now, rather than have them wait till our last will and testament is read. The down payment on a car or a house; the tab for day care for a grandchild--these are some of the things we may offer to help with--by gift or loan--and that give us a measure of pleasure to underwrite.

But what if it's not us offering the assist but them asking for an "advance" on the money we'll be leaving them? Does it matter what the ask is for? Does their asking, rather than our offering, put a different cast on the "feel good" moment? Are they presumptuous in their expectations?

It's complicated. A woman who wrote to Social Qs for advice on whether or not to ask her elderly parents for an "advance" to make it easier for her to buy a house, be able to underwrite family gatherings and otherwise "enjoy some of it while they're alive." The letter writer also noted that her parents had willingly paid for the education of her sister's children and that an "advance" would more or less even the financial-legacy scales.

Philip Galanes advice to the daughter in question is one we might take into account if such a request comes our way.

If you are sure that [your parents] are still competent to make this decision and can afford it, ask for a loan. Let them decide whether to make it a gift. And drop the tit-for-tat with your sister over her children’s education. That help was given at another time and probably long planned.

My biggest reservation here is that many parents I know would go without to help their children (even deep into adulthood). If that sounds like yours, stick with your original plan to pay for the house yourself. There comes a time to put our parents first, after years of the reverse arrangement.