Saturday Finances—When to Stop Giving Money to Adult Children

I'm not an expert.  I'm just paying attention.

"Neither a borrower nor a lender be; 
for loan oft loses both itself and friend, 
and borrowing dulls the edge of husbandry."  

~Polonius to his son, Laertes — Hamlet, Act 1, Scene 3

lifelong financial management

Empty Nest & Beyond

  • Only 21% of workers are confident that they'll have enough money to live comfortably in retirement.  Employee Benefit Research Institute's Retirement Confidence Survey 2016 
  • 26% of workers have less than $1,000 in savings & investments that could be used for retirement (not counting primary residence and workplace benefits, e.g. pensions).  —EBRI RCS 2016 
  • 54% of workers have less than $25,000 in savings & investments that could be used for retirement (not counting primary resident and traditional work benefits. —EBRI RCS 2016 
  • Fidelity's Benefits Consulting Services estimated that the average healthcare cost for a couple, both age 65, who retired in 2015 would be $245,000, up from $220,000 in 2014.  (Based on life expectancies of 85 years for men & 87 years for women.)
  • Less than half (48%) of workers report that they &/or their spouses have ever tried to calculate how much money they will need in savings to live comfortably in retirement.  That means that more than half of us choose not to address the issue. 
  • The proportion of workers, including spouses, who have saved anything at all for retirement is now at 69%.  —EBRI, RCS 2016

Sources & Discussion

Craig Copeland, Senior Research Associate & co-author of the EBRI Retirement Confidence Survey — Comments

Matthew Greenwald of Greenwald & Associates — Comments

To Give or Not to Give to Adult Children?

That is the question.  Here's the uncomplicated answer:

It's up to you as long as the financial support that you provide for someone else does not impair your own financial well being.  

It's as simple as that.  

Other important things to consider...

1.  Bailing someone out financially does not provide them with the experience and the expertise needed to manage their own financial affairs and live independently for the rest of their lives.

2.  Parents are not a bank.  Advise adult children to consult with a financial advisor to review their finances and come up with a realistic financial plan going forward.  Redirect them to professionals who are qualified to give sound financial advice.  Allow grown children to step into their adult roles and make their own private financial decisions.

3.  A promissory note or other legal document is no guarantee that a loan will be repaid.  Money matters are emotional, especially between parents and children.  Stay out of the crosshairs and refer them to a loan officer at a bank.

4.  Give love and support.  Not money.  Being indebted to a parent not only skews the value of earned money, but it blurs the line between love and obligation.  Money is not a substitute for love.  Banks dispense currency, employers dispense paychecks, and aging parents dispense memories, home cooking, and concern.  Go to the right place for money.  

• manage • your • money • wisely •

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