Why I Will Stop Giving My Kids Money Once They’re Employed

November 07, 2018

One of the topics that comes up on our Financial Helpline is employees looking at options to provide financial support for their adult children. Often parents are calling to explore ways to get at their retirement savings (either through a 401(k) loan or other withdrawal) to help their kids navigate challenges they are facing. I guess I shouldn’t have been surprised then to learn that this study found parents spend twice as much on their adult children as they save for retirement. I knew they were helping them, but I was stunned!

I would never tell anyone how to parent and, as a father of two daughters, I get that parents would do anything for their kids regardless of the cost. However, it got me thinking and I thought I would share some of my own story to help shed some light on this issue.

Mom and Dad to the rescue!

As a young professional fresh out of grad school, I was living and working in Los Angeles. While I was making a livable wage, I found the cost of living in LA was putting me in a tight spot every month financially. I found myself using credit cards to pay for my entertainment (which was more than I care to admit as a single guy in LA) and even some necessary expenses. Before long I was calling the bank of Mom and Dad asking for a “loan” to help me get by each month.

As many parents would, they agreed to help me out. I wish they would have said no. Sounds strange, but by bailing me out, I didn’t have to learn how to manage my money. This became a real issue later as I had an emergency come up and I had to ask for a sizeable chunk of money that resulted in my parents dipping into a retirement account to cover for me. While I have since learned to manage money on my own and repaid my parents – the embarrassment I felt still is fresh in my mind. The last thing I wanted was to hurt my parents’ ability to retire, but I wasn’t mature enough at the time to think about the difficult position I was putting them in.

What it means for my kids

I would have been much better off had my parents simply told me that they could not help me out and that part of being an adult is to learn to manage my finances more responsibly. This would have made me a better money manager much earlier in life, because I would have had no other choice.

So, when I think about my two young daughters, I know it will be a different story. Instead of handing them money when they are adults, I plan to serve them now by teaching them about saving for the things they want, living below their means, and sacrificing what they want right now to have what they want most. Not because I don’t love them and wish to see them struggle, BUT because I do love them and want to see them start their own lives with the tools necessary to manage their finances.

My hope is this will help them be grateful for the things money can afford them AND appreciate the hard work necessary to earn a living. I know they will struggle as young adults just like I did (and like most of us do), but by helping them with a spending plan and healthy money habits rather than giving them money, they will learn earlier in life how to better handle their finances. While I am beyond grateful to my parents for their help, I wish they would have done the same for me.

As the old saying goes, give them a fish and they eat for a day, but teach them to fish…

If you are struggling with the tension of trying help your kids without damaging your own finances, hopefully my story will help. Believe me, helping them learn good habits will benefit them much more in the long run than any short term gift or loan can!