When Is It Time to Cut Your Kids Off From Your Finances?
And how do you do it?
I met a woman recently (she shall remain nameless) who did something I’ve been thinking about doing myself: She stopped financially supporting her grown kids.
“How did you do that?” I asked.
“It was awful,” she acknowledged, “but it had to happen.” She had just gone through a divorce, and had to focus on making sure she could support herself and start socking money away for her own retirement. So she took a year’s worth of payments for all of these things, combined, gave the kids lump sum checks, and told them “be smart.” Two of them were, she says; one wasn’t. (He’s staying with her for a while.) But on the whole, that’s progress.
According to a December survey from CreditCards.com, three-quarters of parents are providing financial support for their adult kids. That support takes many forms: cellphone bills (39 percent), transportation (36 percent), rent (24 percent) and utilities (21 percent) as well as help paying down debts, most commonly student loans (20 percent). But at a time when the majority of Americans haven’t socked away nearly enough for retirement—the median retirement savings for all working families in the US is just $5,000, according to the Economic Policy Institute—it makes sense to do a little less for our offspring, so we can think a little more about ourselves.
(As an aside: That $5,000 stat is shocking, but accurate. The mean, or average, amount of retirement savings in the working adult US population is closer to $96,000. The median, or midpoint, is significantly lower because those people who’ve managed to save a lot more skew the average up.)
So, how do you figure out when and how to cut your kids off financially? First, know what you’re paying for. I don’t mean tactically, although—according to research from Bank of America Merrill Lynch—one-third of parents don’t even know the specifics of what expenses they’re covering. I mean, think about the life that your money is allowing your children to live. “Money can be a gift, a bribe, an incentive, or an enabler,” says Ruth Nemzoff, a Brandeis University Women’s Studies Scholar and author of Don’t Bite Your Tongue: How To Foster Rewarding Relationships with your Adult Children. “Choose wisely, know your motives and make them clear.” Here’s how.
Assess the situation.
There are three distinct variables to consider, Nemzoff says. First: You, your financial needs, emotional needs, and expectations. Second: Your child, and their financial needs, emotional needs and expectations. And third, the environment. “A child who came home after years of working hard because they got laid off is very different than a kid who comes home and doesn’t work hard at getting a job,” she says. Similarly, if you’re in a market where it’s really tough to get a job, that’s different than feeling you’re enabling your child to be overly picky about looking for one.
Explain the why.
Your child deserves to know—and will likely react better if they know—why change is about to happen. Perhaps, like the woman I met, you’ve had an event (like a divorce or a layoff) that has dramatically changed your own financial landscape. Maybe you’re thinking about retiring yourself. Or perhaps you’re truly afraid that by continuing to support your child in this way, you’re hurting their long-term chances of achieving independence. Whatever your logic, lay it out on the table. If it involves changing the financial landscape for one sibling and not another, detail your reasoning for that as well. (Perhaps it’s that you’ve decided, after three years, that car insurance will be on their tab, while a second child is on year two, and another just got their first car.)
And keep in mind: You don’t have to defend it, just explain it. It’s your money.
No one reacts well to surprises, but financial ones are particularly onerous. Give your children a good six months to a year of notice that these changes are going to happen. That gives them enough time to understand that they’re going to need to either increase their overall earning or decrease their overall spending in order to absorb these costs. Offer to help them figure out where their money is going today by sitting down with their monthly paychecks, bills, and following the cash flows.
Finally, there will be cases where it makes sense to keep paying your child’s bill, but still give them financial responsibility for it. The classic example: It might make sense for your kids to remain on the family cell phone plan in order to save the whole family money. In this case, Venmo (and its competitor, Zelle) can be a big help, as the services allow you to bill each other rather than asking for the money month after month. Your kids are likely already using these platforms with their friends, so they’re used to being electronically nudged, and won’t take offense.