Sunday, May 20, 2012

Who Gives Money to Their Grownup Kids?

     B's son came home from school the other day; he had been to a birthday party at the apartment of one of his friends. The friend is going to college and working as a salesperson in an Apple store. She has an apartment in a luxury building in the city, which she shares with a classmate. It's a new building, with a view and a doorman and a rooftop garden (where they had the party). And guess who's paying for this luxury apartment? The two girls' parents.

     The report made me shake my head. At what point do parents stop spoiling their kids?

     Then I thought, well, I have two 20-something children. They are both now out of college, they're both still single, and they both have fulltime jobs -- not a small feat for young adults in this economy. But neither one makes much money -- about enough to pay their rent with a little left over for incidentals, so it doesn't bother me to help them out a little bit.

     I do not pay their monthly rent in a luxury building. But I do pay my son's cellphone bill (it's cheaper to have him on my account than for him to pay separately) and I pay for his fitness club (because I want him to be healthy); and I pay to fix up my daughter's car (because I want her to be safe) and a few other sundry items.

     Can I afford to help them out? Yes, I can. Does it mean that I have to cut back on a few expenses of my own? Yes, it does.

     (And does it sound like I'm making excuses?) But I don't really mind.

     I was taken by the words of George Clooney in his recent movie The Descendants. He said he feels that it's good if you can give your kids enough money so they can afford to do what they want, but not give them so much that they can afford to do nothing.

     Of course, in the movie George Clooney plays the descendant of Hawaiian royalty and the trustee of an extended family that holds millions of dollars worth of prime Hawaiian property, while I'm the descendant of some European castoffs and hold a tract house in the far reaches of a Northeastern suburb. Nevertheless, I get what he means.

     According to a recent survey by Ameriprise Financial, an investment firm headquartered in Minneapolis, I am not alone in offering some financial support to my kids. "Nearly all Boomers surveyed (93%) say they have provided some form of financial support to their adult children. A majority have helped them pay for college tuition or loans (71%), allowed them to move home and live rent-free (55%) or helped them buy a car (53%). Many are also helping their kids pay for car and health insurance, as well as cover basic expenses like rent, utility and car payments."

     The survey showed that a lot of Baby Boomers are also helping out their parents, which puts them in double financial jeopardy. The result? Many Boomers have stopped saving for their own retirement. Ameriprise reports that now in 2012 only one-third of Boomers say they are trying to grow their savings, a significant decline from an earlier 2007 study showing that 44% were adding to their savings.

     One key difference, however, is that only 10% of Boomers say helping their parents has slowed down their retirement savings. But 34% feel the same about the support they’ve provided their adult children.

     I'd be interested to know how some others have handled this situation or feel about the issue. But for me, I'm thinking you shouldn't let pressure from your kids, or your impulse for generosity, hurt your own retirement plans. So we need to open up a discussion with our adult children about how they can manage their own finances more effectively. And we need to talk to them about the limits of our financial support. Sometimes, as parents, we think we can do everything. But we must recognize that there's also a time to let go.

     So, as for those parents paying for their daughter's luxury apartment, I'd advise them to listen to George Clooney's character in The Descendants. As for the rest of us, by all means help out your kids, if you can afford it, but not at the expense of robbing your own retirement nest egg.


Mac n' Janet said...

We have helped our adult daughter from time to time, but the biggest help we gave her was when she lost her job, we sent a bit of money each month to help her out. She worked every temporary job she could find and it took 15 months to get a worthwhile job. She learned from the experience, has kept a 2nd job that she can do at home in order to build her savings back up and pay off all her debts The money we sent was a gift, not a loan, she's an only child and has always tried to be independent.

Rubye Jack said...

As you said, if you can afford it. Why not? I've helped my son off and on and it makes me feel good to be able to help.

Linda Myers said...

My husband and I have eight children between us, now between the ages of 25 and 41.

#1 lived with us some years ago while she was going to school. She cleaned our house and cooked twice a week in return for room and board.

We just lent $1500 to #2 for a new business. The business turned out not to be a good deal and he came over Friday to ask for an extension on this month's payment.

#3 has never borrowed. We shared the cost of her first two years of college, and she lived at home then.

#4 has borrowed several times, repaid very little, and has been out of touch for several years.

#5 has borrowed several times, repaid some, been given gifts of transportation related to his daughters and his education.

#6 has borrowed for a second mortgage and is current on his bill, but is not in touch very often.

#7 has never borrowed. We bought him a plane ticket to participate in a marathon on the other coast.

#8 has never borrowed.

I would help, in a heartbeat, an offspring who was in a tough spot through no fault of their own. Poor life choices, on the other hand, I rarely participate in.

Olga said...

My parents helped me out from time to time and I do the same for my kids. A small loan when needed for some emergency or cash in a b-day card that I know will be greatly appreciated. But paying the rent, day to day expenses...they were just unlucky to be born before the days of that total immersion parenting stuff.

Arkansas Patti said...

My brother and I, blood realated and the oldest, never asked for a dime from our parents once we left the nest. My younger step sisters however had no qualms about asking. Same dad, different motherrs. Interestingly, my brother's kids are self sufficient, while my sisters' kids are a constant drain.
I think Georges rule is a good one.

Janette said...

It is hard not to get into the "hand out" mode when you see siblings constantly having their hands greased. Linda hit one thing for me- borrow or not- visiting is more important. My brother (50) gets money from mom all the time and, although he lives blocks from her, never sees her.
We never borrowed or got money from my husband's parents. We borrowed from my parents once- but my father charged 2% above prime- so it was the last time :>)
We have helped both of our kids through school, buy a car and now, buy a house. We saved for each thing and specifically had the money set aside. We also pay for hotel rooms on vacation. When they were first married and made nothing- we paid for the vacations. My daughter has needed more than my son (place to live, help with child) and that has been fine. We rarely lend- because we never want to feel upset if the money does not come back.
We have had inheritances at certain times of our lives- and those are shared with the kids. We are "Molly Browns" and believe that money is best when spread around.
We have also saved for our retirement as well. I think we will be fine.
I guess that we do not expect the next generation to be as wealthy as this one--- so why not help in the tight spots?
Does anyone help with grandchild expenses? Are we really way over the top?

schmidleysscribblins, said...

This is a timely piece. David and I have given so much money to children and grandchildren that we could have taken a cruise around the world with the money. It isn't just children you see.

David paid for tutition, and other expenses, and I paid for prekindergarten, piano and ballet lessons, clothing, and a variety of other things including college accounts, most of which the grandkids and in some cases the kids don't remember.

Enough is enough. I have a friend who just took in her 57 year old daughter. The older couple (the parents) have just moved into a retirement community and took their daughter with them. Apparently there is no end in sight. Dianne

MerCyn said...

Wow, you have certainly opened the hornet's nest. We got our kids through school without loans and now try to be generous with gifts. They do not ask us for $, but know if needed we would help. I think the best thing we are doing for our grandkids is contributing to their 529 college fund.
On the other hand my husband and his sister do not talk to their brother, who recently suggested he take his part of their Mom's inheritance now. They balked at the idea (who knows how much $ will be left; she's a healthy 86) and he now won't talk to them.

Anonymous said...

I borrowed 18k from my father for a 20% down-payment on a building to house my business and paid it back in 2 years at 8% interest. Two years ago, we remodeled the building (cute house downtown) and moved my mom into it because she needed to be closer to us. My brother, on the other hand, has borrowed 110k from our father and is pissed that he has been asked to repay it. He is angry because my father lent (given) his gold-digger girlfriend that much, or more, and has not asked her to pay it back. Bro feels that it's unfair - not that he's going to cut back on his extravagant lifestyle and do the right thing. Who know, maybe he will. Either way, dad finally put GD girlfriend in the will (at my request, so things are clear) showing that she will receive 16% of his assets, while the rest is split b/t my brother and I. Seems fair to me, particularly since dad wrote in the debt to be repaid by my brother. Money sure complicates things.

willie55 said...

"On the other hand my husband and his sister do not talk to their brother, who recently suggested he take his part of their Mom's inheritance now. They balked at the idea (who knows how much $ will be left; she's a healthy 86) and he now won't talk to them"

Its not his money!! It is your moms. He is not entitled to anything.

Anonymous said...

It is very interesting to read these comments and see
how people have supported their children into adulthood.
I began working at age 16 in a fast food business. In college, which was paid for through my savings and some student loans, I commuted 30 miles and held down a full time job. I graduated on time, didn't live beyond my means and now I am gainfully employed making a handsome salary. I am now living in a modest home and not mortgaged to the hilt, drive a nice used car and have a pension to look forward to. My parents did not give me a dime for any of it. I saw how hard they worked and wasn't about to place a burden on them to fund my life. They are enjoying their golden years debt free and I couldn't be happier for them.

Anonymous said...

My perspective on assisting my two adult children has been to attempt to teach them to "fish for themselves". Without ranting, I will note my own childhood/background of uneducated parents, living in poverty who saw no need for education, particularly for a woman. Even at my age (54), I still find it difficult not to roll my eyes when I think about those early years. Having said that, I am blessed with two very bright children, now in their 20's. Upon their graduation from high school, I did not have the means to pay for college and they were not driven to attend, but each worked full time jobs, often overtime or a 2nd job and were self sufficient. With just a few short years of "reality", they determined college had far more importance than originally thought. My daughter, 29, just graduated with honors and received her BSN, with many job offers and no student loan debt (due to her prior savings, scholarships, and plain deprivation. lol) I did lend as much assistance as possible, which included paying the rent on her tiny apartment off campus the last year and a half as well as more when she was laid off from her job. She continued to generate as much income as possible and did everything from clean houses to temp jobs. A similar situation is occurring with my son. They are both hard workers and exceptional students. It took me decades to achieve the comfortable/secure stage I am at. I look at this process as "changing my family tree". I know that families and circumstances are different. I am not inclined to provide luxuries, but this process seems to be very successful for my family at this time.

Anonymous said...

My husband and I have helped our adult daughter, who's single. Little things, mostly. And recently, when she was between apartments, we let her crash at our house until the next apartment came open. Just there was no rule book when our kids are born, there's no rule book for how we treat them as adults. Each case is different, each relationship has its own reasons for being the way it is.