Will money gifts to Adult Kids really help them? Do financial bailouts enable our children and make them dependent on us as parents? Here are 8 ways to help without enabling them.
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Money Gifts for Adult Kids — What Should We Do?
A website visitor asked:
We have three grown kids. Two are doing fine, but the youngest one is married with two kids and is struggling financially. They are behind on their mortgage and credit card bills and they are constantly coming to us asking for help . . . and we’ve been giving it.
What should we do to help them? We don’t want to enable them, but we want to help our grown kids. Is it crazy to want to help them?
Repeatedly shelling out money gifts to adult kids won’t help
Giving money gifts to adult kids or family members is a touchy subject and doesn’t always help the recipient.
Please proceed carefully. You’re right, we don’t want to enable our grown kids. As we’ve seen in the news, whether it’s a government or a bank, bail-outs are not an effective way to solve a long-term financial problem. And when you’re dealing with family relationships, giving money can really muddle things. Adult children may need some “tough love,” from caring parents if they are going to learn from their circumstances.
Over time we’ve developed a list of nine things that have worked well. We encourage giving a financial “hand-up” rather than giving a “hand-out” for families dealing with adult kids who ask for money.
Sometimes it’s in the struggle of working through dicey money situations that financial strength and wisdom is developed.
By bailing out adult kids we can short-circuit the learning cycle and cause financial dependence, instead of independence.
Maximum Money Gifts in 2022 without Needing to Pay Taxes
According to the IRS: “The annual exclusion for 2014, 2015, 2016 and 2017 is $14,000. For 2018, 2019, and 2021, the annual exclusion is $15,000.“
The annual exclusion amount for 2022 is $16,000The Internal Revenue Service – See Annual Exclusion Tab
A Retiree/ Senior Mom Helping out Adult Children
Question: My grown children keep asking to borrow money from me. I want to help them, so I lend it to them, but they don’t pay it back. I constantly see them wasting money by eating out, drinking, buying the latest cell phones along with other technology, and redecorating their homes.
Their financial situations don’t seem to be improving in spite of all my loans. I am in my late 70s and need my money for living expenses and medical bills as I get older. What would you do?
STOP Giving Them Money!
STOP giving your children money. You aren’t lending to them, they’re taking it as a gift. It almost never helps to bail-out a financially irresponsible adult. Your heart sounds kind, but your methods definitely need to be adjusted. Instead of giving them money when they have a crisis, there are plenty of small ways you can actually help them.
But most importantly, don’t pay for anything large like rent, a mortgage payment or buying them a car. You’ll need to stand by and watch them struggle, but it is in the struggle where they’ll gain some real fiscal strength.
Bailing them out produces a strong dependence on you, not on their own problem-solving abilities.
If there is a true medical emergency with your child, son- or daughter-in-law, or grandchild, you might help out with medical bills. But usually giving money gifts to adult kids rarely solves financial problems.
This may sound hard-hearted, but adult children need to stand on their own two feet financially, and facing the consequences of their decisions is a good way for that to happen.
RELATED ARTICLE: Best Retirement Gifts
Twelve Tips for Giving Money Gifts to Adult Kids.
1. Don’t give them cash.
People who are struggling financially usually get there because of poor spending decisions. Giving them money is like giving an alcoholic a drink. It usually doesn’t solve anything.
2. Do give them food.
We always have extra food in our pantry, so often times will just fill a grocery bag and give it to someone who needs help. If your kids live out of town, mail them a grocery gift card.
3. Do give them gas.
Buy some gift cards for a nearby gas station or a monthly bus pass to help with transportation costs.
4. Do pay a utility bill.
Offer to mail a check directly to one or two local utility companies — don’t give them the cash — mail the bill yourself.
5. Negotiate with Them
They may feel overwhelmed when they are dealing with creditors, so help them negotiate for lower rates or lump sum payoffs. But don’t offer to pay off the debt.
6. Help Them Move
If they’re in a home they can’t afford, help them pack boxes. Call family and friends to help, but don’t give them money.
7. Give Coaching and Encouragement.
Encourage them to surround themselves with a team of people who can help them right-side their finances. Most of the time, spending problems stem from bad spending habits and wrong thinking.
8. Give them Books:
By reading or listening to books that teach sound financial principles they may start to change their thinking and their habits.
9. Pay for Money Coaching:
By getting together with a money coach they can learn new habits for managing their spending and saving.
10. Encourage them to Get Credit Counseling:
If they’ve got a lot of credit card debt we usually recommend Consumer Credit Counseling / Money Management International. They are one of the oldest (more than 60 years), most reputable, and inexpensive credit counseling groups around.
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11. Encourage Marriage Counseling:
Often financial problems are a reflection of emotional and relational problems. An insightful counselor can help uncover wounds and habits that are leading them down the path of financial self-destruction.
12. Consider putting it in an Annuity or other Investment
If your adult kids aren’t good with managing money, consider making putting your gift into some sort of investment that pays them a small amount each month over time. Annuities are one vehicle that does this. Steve’s father did this as one part of his estate plan.
When money gifts to adult kids need to stop!
If you have given money when they’ve asked for it in the past, and they’re coming back asking again, you’ve got to stop enabling your adult children. Bailing-out your adult children usually doesn’t teach them anything except to come back for another bailout later.
We know that deciding not to help, or to limit your aid is never an easy decision. Most of the time family loans don’t work out well. It tears at your heart when you see your kids (and your grandkids) struggling. But if we take the long view, helping them wrestle through a problem rather than doing the heavy lifting for them, it will be more likely to produce long-lasting, good results.
Regardless of what they might say, love doesn’t always mean giving them what they ask for; but love does mean giving them what will be good for them.
Your adult kids need to learn to live within their means and that means learning to say no to things they can’t really afford.
It’s not crazy to want to help, but it is crazy to think that repeatedly giving them money will solve the problem. So stop enabling your adult children and start empowering them!>
We wrote a whole chapter about helping our adult kids when they have financial difficulties in our book,
You can also check out our Money Saving Tips Budgeting page for more ideas.