If you have a child who is set to graduate from college later this spring, it may be important to consider what, if any, type of financial support you’re willing to provide. As your children prepare for the “real world,” their cash flow limitations can sometimes become a barrier to their ambitions. Many parents choose to offer some kind of financial support at the outset. In fact, recent studies show that nearly 60% of adults provide financial support to adult children who are no longer in school [1].
Before deciding to help out an adult child, it’s important to take a comprehensive assessment of your own financial picture. Here are a few things to consider:
- Can my budget and retirement savings handle this type of financial obligation?
- Will this cause any family friction between my children?
- Could this contribute to a lack of responsibility in my child’s own financial life?
Consider a formal “loan agreement” where funds can be repaid over a set period of time on favorable terms. This will not only keep them accountable, but also potentially minimize the impact to your finances by creating a repayment plan.
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- Is there a non-monetary way for me to help my child?
Perhaps you could offer the use of a family car that isn’t being used very much. You might draw on your professional connections to help him or her secure an interview or land a higher-paying job.
A parent’s devotion and willingness to help their children stems from a special relationship developed over a lifetime. The decision to help financially can often be an emotional one that is influenced by this special relationship. Considering these questions can help lead you to a more objective course of action.[1] Online poll conducted by Forbes & The National Endowment for Financial Education, May 2013 (Adults age 18-39).
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