It's every parent's dream to give their children the world, and you did it. Unfortunately, now that Junior and his sister are adults, the toys they want are expensive and their needs are endless. A new house, a second car, a family vacation and braces for the kids are just a few of the items on their long list of things they want but can't afford unless you help pay for them. The problem is, if you keep the cash flow coming, your retirement is going to be in jeopardy.
It's an increasingly common dilemma that was decades in the making. Often, it starts when the kids are young. Remember when your son was a little boy, and you always made sure he had money in his pocket? When he wanted a car, you bought it. When he went to college, you paid for it. The same rules applied to your daughter. When she wanted a new dress, you pulled out a charge card. When she wanted that vacation with her friends, you gave her the money. Now that the kids are all grown up, they remember the lesson that you taught them: put your hand out when you need money, because mom and dad will fill it up with cash.
Just Say "No"
What can you do? The simple answer is that, until you learn to say "No", your kids are never going to learn how to handle money responsibly. Of course, stopping the handouts and starting to teach financial responsibility is sometimes easier said that done.
If you've been generous about giving handouts to your kids, they have probably gotten used to the comfortable lifestyle that you and your spouse worked so hard to achieve, but they didn't see, or were too young to remember, the days when you didn't have money. Now that they are old enough to understand, it's a good time to talk to them about how you struggled to get by on small salaries earlier in your life. For example, it's time to let them know that the house you live in took three decades to pay off, or that your parents (their grandparents) are still living and are approaching an age where you may need to provide them with financial assistance.
Kids Flying The Coop…
If you are one of the lucky 50% of the population with adult children ages 18 to 24 that have actually left the nest and are living on their own, cutting off the cash flow is a bit easier. Start the process by having a frank conversation about all of the issues covered in the previous paragraph. From there, ask the kids to put some serious thought into their lives. Where do they want to live? What do they want to drive? How often do they want to go on vacation? What are they going to do to earn that lifestyle?
…Or Refusing to Empty the Nest
If your adult children are still living at home (often referred to now as boomerangs or KIPPERS), it's time to start charging rent. Sooner or later, the kids need to learn that there are no free rides in life. From there, it's time to talk about financial self-sufficiency. Have the kids explain what they are going to do in order to support themselves. How do they plan to fund their golden years? What will they do if their kids expect a lifetime of financial support? How will they handle it if their children's financial handouts make it impossible for them to achieve their post-work dreams?
Financial Lessons 101
Regardless of where the kids live, talk to them about their lifestyle choices. Explain the importance to live within (or even below) their means. Teach them that anything they can't buy with their own salaries is an item they can't afford. Talk to them about the responsible use of credit cards. If you work with a financial services professional, set up a meeting so that your children can begin to learn about managing their money too.
For holidays and birthdays, how about giving your child the gift of financial security with books about finances or subscriptions to the financial publications that you read?
Last but not least, cut off the cash flow.
The Bank of Mom and Dad
Stop funding discretionary purchases. If the kids don't need the money to avoid eviction or starvation, don't give it to them. If they do need it to avoid such an emergency, make it clear that you expect to be repaid, and either make a payment plant or set a date for the repayment. Ask them to explain how they intend to change their lifestyles to avoid the need for another loan. Share a copy of this article with them so they can understand how their greed is hurting their parents.
While this economic lesson may be emotionally tough medicine to administer, it will give your children the knowledge they need to survive long after you aren't there or able to pay the bills. If your kids are ungrateful in the short term, they will learn to appreciate the lessons in the long term - after all, you probably had to learn the hard way too.