Q: I’ve got three adult children, two sons and a daughter, who are all in their 20’s. I’m concerned that they aren’t managing well enough financially, my sons in particular. One has asked to borrow $7,500 to pay back his boss and catch up on credit card bills. The other is behind on his line of credit and mortgage payments and has asked for help to avoid possible foreclosure. Their sister is a bit better at managing the little extra she does have and has in the past only asked for some help with a damage deposit when she rented her own place after a soured relationship. It was $800 and she paid me back a few months later with her bonus from work. Part of me wants to help my sons, but my husband thinks they’ll learn more if we don’t bail them out. I can’t say I disagree but I worry about how they will feel about us and if they’ll be able to manage. What should I do? ~Gail
A: As parents, we do what we can to help our children, and the thought of letting them get their education from the "School of Hard Knocks" might be hard to stomach. However, if you are concerned about their long-term financial stability, bailing grown children out of a financial crisis might be the worst thing you can do for them.
Here are 4 reasons why you should step back and let your adult kids bail themselves out of their own financial disasters:
1. They Get the Best Teacher
It’s often said that experience is the best teacher. Think back to when your kids were young and you warned them that they would fall if they balanced too close to the edge. A financial crisis is just a different type of edge with consequences bigger than a skinned knee.
No matter how old we get, we learn and remember best by doing and trying it out for ourselves. The money skills someone learns by getting themselves back on track financially typically last them the rest of their lives; repeat lessons are not required!
2. They Learn How to Fish
Sometimes helping your children once can lead to repeat visits to the doors of the “Bank of Mom and Dad.” Think of it as the difference between giving them a fish and teaching them to catch their own fish. By bailing them out you are making it easy for them to rely on you.
Money and Family Relationships Can be Messy
Ask yourself what happens when you aren’t able to or more importantly, don’t want to, bail them out a second, third or fourth time. They didn’t learn how to help themselves the first time, so you need to assume that they’ll ask for your help the next time as well. This can make for tense family relations, especially when you or other family members don’t agree with their spending choices.
3. They Won’t Put Your Financial Heath and Stability at Stake
While you might be able to afford to help one time without jeopardizing your own long-term financial stability, you don’t know what your financial future holds. Maybe your investments will be down, you may want/need to do expensive home repairs or renovations, another family member might need help, as you get older you’ll likely have medical expenses, or you may want to retire early.
Giving your hard earned cash to your kids could put your own financial health and stability at stake because there’s a chance they won’t be able to return the favour or repay what they borrowed.
4. It Makes it Harder to Continue Engaging in Self-Destructive Habits
By giving your kids money or paying off their debts you are in essence increasing their disposable income and possibly enabling self-destructive habits. Ask yourself why they need the money and what spending choices they are making with the money they earned themselves. If they are engaging in self-destructive habits, help them instead to find ways to manage money better and make the most of what they do have.
Connect them with someone to help them create a realistic household budget to stop the overuse of credit. If they are struggling with non-financial problems like an addiction, assist them with finding the help they need. If they must increase their income, find other ways to support them, e.g. help with daycare, send them home with some leftovers, gift contributions to RESPs, or offer to do car or home repairs for them if you have the ability.
The Bottom Line on Helping Adult Children Out of a Financial Mess
Not bailing your kids out of their financial mess doesn’t mean you love them any less. Some might say you love them more because you care too much to give in and set them up for future failure. If you do lend them money that needs to be repaid, be clear about the repayment terms and expectations. Draw up a written agreement so there are no misunderstandings later. Support, encourage, reassure and love them through their trials and tribulations. It will take time and effort to get back on track, but the triumph will be theirs to claim.