Bailing Out Your Adult Kids Financially

by Beth Blanco, AFC®

We take a look at why continually bailing out your kids is a bad idea both for them and for you. Learning to say no to your kids is difficult, but it will actually help them in the long run.

As I spoke with Nora about her credit card debt, she sheepishly admitted to helping out her kids from time to time. When I asked what ages her children were, she told me they were 26 and 29, with households of their own. Nora’s debt had crept up to $35,000 by the time she reached out for help.  As a financial counselor I hear stories like this all the time.

The week before, Michelle told me about the various rehab stays and other expenses her 24-year-old son’s addiction had cost them, to the tune of over $100,000. They had to refinance the house, take out a second mortgage and currently have 18 open credit cards with balances. I’ve seen parents spend their retirement funds, skip their own bills and take on debt when it comes to helping their adult children.

We want our kids to have it better than we did.

I get that we want to make our children’s lives better than we had it. My co-worker Jon told me his dad said the day he turned eighteen he needed to move out of the house and support himself. He got a full-time job and shortly thereafter met his future wife. They married and started a family.

Things are different now than in our generation. However,  I wonder if we have swung too far in the other direction.

The majority of parents are helping out adult children in some way.

A Pew Research Center study revealed that 50% of parents with an adult child provide them with at least some financial support and 26% of these parents increased support during COVID. About 62% of parents supporting adult children give them about $1,000 per month with many of these parents providing more to an adult child than they are contributing to their own retirement savings.

Kids may in deed need assistance with expenses until they begin working, especially during those college years. It’s once they have graduated and secured a full-time job that it becomes problematic. Having to help with rent or a car payment after knowing they purchased the latest iPhone can be irritating to say the least.

Learn to say no, as difficult as it may be.

Learning to say no is difficult but actually helps your kids in the long run. Let’s look at why bailing out your kids is a bad idea:

• You rob them of figuring out things for themselves. Self-sufficiency and problem solving are much needed skills that will serve them well in all areas of their lives. When you step back, that gives them a chance and permission to think outside the box, to learn to negotiate and work out compromises. Having those difficult conversations with creditors and facing challenges actually makes them grow as people.
• You are putting your own financial security at risk. People are living longer, an average age of 80+. Retirement funds need to last, especially for unforeseen medical issues. Spending those funds now or creating debt that needs to be repaid in retirement is jeopardizing your own security. Putting your foot down protects your income and assets.

You can help your children in other ways.

Encourage your kids to sit down with a financial counselor and look at their budget. Creating a plan for spending, saving and paying off debt is the only way to financial freedom. If you feel compelled to loan money, attach that as a condition. Also, create a repayment plan so they understand you mean business.

Many young people are dealing with both student loan and credit card debt, and living paycheck to paycheck.  Connecting them to credit counseling is an excellent way to have a counselor assess their income vs. expenses and provide them with personalized options based on their goals.  If credit card relief is ultimately the goal, a debt management plan could help them reduce interest and payments; however, full balances are paid back so it doesn’t destroy their credit.

Saying no can be stressful, especially when your kids know how to push your buttons and make you feel guilty. Weaning them off your pocketbook and having them rely on themselves will not only save your relationship, but give them tools they need to problem solve in other areas of their lives.

Nora thanked me over and over when I showed her what it would take to get out of debt before retirement. She told me she had a plan and a renewed mindset to be able to tell her kids the Bank of Mom was now closed.

• Loaning Money to Adult Children
• 10 Reasons to Kick Your Adult Children Out of the House
• Things to Consider Before Helping Adult Children With Housing
• Providing Equal Financial Assistance to Adult Children
• When Your Adult Kid Wants to Borrow Money

Reviewed June 2022