Are Your Adult Children Financial Grown-ups?

“Train up a child in the way he should go; even when he is old, he will not depart from it.” Proverbs 22:6
 
It was once a rite of passage for young adults to leave home by the time they turned 18.  Now it seems like that timeframe has expanded well into adulthood. And while our children grow up and become adults, we never stop being parents and often it’s hard to know where to draw the boundaries between helping and enabling, especially when it comes to financial help. However, there has to be a cutoff at some point in time—right??
 
One of the most important steps to help your young adults become financially independent is for you and your spouse to discuss and decide how much to help and how much to let them handle on their own. This decision is more art than science and it requires prayer and discernment. It's important to base your decisions on how well your adult children are handling their money. The last things parents should do is to fund wasteful spending for an adult child who has no thoughts of fiscal responsibility.
 
There is a fine line between spoiling them and helping them. In our situation, if we do help, it’s not by givingthem money but providing something—like taking the grandchildren shopping for school clothes and supplies, or matching any money they are able to prepay on their mortgage.
 
Any financial assistance should have simple rules.  If the money is a gift, then it must be freely given and used in any way they wish. A gift is a gift. If the money you give is supposed to be earmarked for a specific purpose, then the ‘rules’ need to be clearly stated. It is important to distinguish between a gift and money that has strings attached. If there are strings attached it is vital for you to tell them what you expect. Family tension and hard feelings can be the result of unstated expectations about how the money is used.
 
Many people ask us if it’s OK to loan money to their adult children.  In our opinion, loaning money to adult children is usually a recipe for disaster.  Once you loan money to someone else, you tend to judge the way they spend it. If your child is not spending in a way pleasing to you, it can cause tension and strain in the family. And if they delay repayment to you while they spend in ways you consider irresponsible, the anger and disappointment can escalate out of control.
 
We also caution parents against cosigning.  If you cosign, you are taking on a risk that a professional lender will not take. After all, there is a reason the professional lender requires a cosigner. When you cosign, you become totally responsible for your child’s debt, just as if it were your own. If they miss a payment or make late payments, it is reported against your credit history.
 
The best way to prepare children to be financially responsible adults is to train them when they are young. This requires you to personally become a good steward and live according to God’s teachings. He will guide you toward the right decisions, even if they’re hard to make. To learn more about Biblical stewardship principles, contact Compass Catholic today.