How to Not Go Broke Supporting Adult Children

by David Ragland

You’ve worked hard, you’ve saved, you’ve downsized, and the nest is finally empty. Life is good. But then one of your kids loses his job. Or she starts falling further into debt. Or decides to send your grandchild to a private school he can’t afford.
Now what do you do? Is your only choice to dip into retirement to support an adult child? How do you manage the feelings of guilt and obligation versus your own needs?

Your Retirement Reality

Once the nest is empty, the kids are off the payroll, right? Or just theoretically? Because your retirement may depend on it, know that it is never too late to talk to your kids about money. Even if that “kid” is approaching middle age.
This is particularly true because during your last ten years in the workforce when you’ll most likely reach your maximum wealth-building potential and accumulate a significant portion of what you need for retirement. This is the time to put more into your 401K, downsize and reduce expenses, and really focus on reaching your retirement goals. Sure, there will be unexpected expenses, but ongoing unexpected expenses from your children shouldn’t be one of them.

Build Your Financial Support Team

But I know. You love your kids. You’ve made sacrifices for them since they were born. Shifting the dynamic can be hard when children become adults and their financial footing is still wobbly.
“These can be really difficult situations,” says Wendy Dickinson, PhD and licensed psychologist at GROW counseling in Atlanta. “When we have parents who are in a crisis because of a failure-to-launch young adult, or an adult child in a health crisis, or perhaps an adult child dealing with an addiction that becomes a bottomless money pit, one of the first things that we do is a thorough assessment. We need to determine 1) what is the goal 2) what would the parents not be able to live with and 3) to what extent the parents are willing to learn to set boundaries.”
Dickinson says that setting a goal is extremely important because it will guide the rest of the process:

  • Does the parent unit want to require the young adult to be responsible for their decisions?
  • Do they want to appropriately financially support them during a difficult time?
  • Do they want to provide for some but not all of their needs?

Essential to the process of goal setting is clear communication and a willingness for the parents to be open and vulnerable about what they are feeling and what they need.
“I always spend some time talking to parents about what they could NOT live with – it’s really helpful in establishing a threshold of behavior. For example, would they not be able to live with their grandchildren being hungry? Or their kids/grandchildren not having the medical attention they need? Sometimes parents will say they are not going to pay for anything, except unlimited counseling if their son/daughter is willing to participate with a goal of getting better. I find there are usually exceptions to what parents are willing to pay for, and in the process of setting boundaries it’s important to be clear about these exceptions upfront if possible.”
Finally, Dickinson says, the parent unit needs to learn to set boundaries. This can be a challenging because boundary setting has most likely been difficult for these parents during their child-rearing years. “Much could be written about navigating the process of boundary setting, but regarding the topic of money, I specifically think it’s important to be clear, consistent and compassionate,” says Dickinson.
“Clear and consistent relate to the goal-setting process and learning how to have difficult money conversations. The compassion that is critical is in separating the feeling from the behavior. It’s OK to empathize with your child even if you are standing firm on the financial support. Often parents interpret ‘boundary setting’ to mean they have to be cold, stoic, or disconnected. Rather you, as the parent, are the biggest cheerleaders for your kids – your encouragement can be the very thing that pushes them to take a risk and realize that with a little work they are able to achieve financial autonomy.”

Rounding out the Team

In addition to finding a counselor who can provide guidance and recommend strategies, you can also lean on your financial planner, accountant and/or attorney. You want a team that has your back especially as you get older. They need to understand your goals and your challenges — including your children’s financial situations — and be there to help you draw the line. They may need to play the bad guy and that’s OK.
You may also want to talk to your financial planner about including your adult child in a meeting so they can see the realities of your budget, as well as the benefits of a financial plan. And unless you can really afford it, don’t distribute an inheritance before you die. We’re all living longer and the expenses associated with aging continue to rise. You may need that money.
The challenges of family and money are nothing new, but how you deal with it can be. Communication is key as is finding the support you need to stay focused on what’s best for your situation. And know that regardless of how old your children are, it’s never too late.

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David Ragland

David Ragland is a Certified Financial Planner™ (CFP®), Certified Divorce Financial Analyst® (CDFA®) and Chief Executive Officer of IRC Wealth, a private asset management company based in Atlanta. Holding both a BBA and a Master’s degree in Accounting from the University of Georgia, David began his career in the tax division of Ernst & Young. He then served as CFO for several companies, gaining experience in taking companies public and propelling them on to the INC 500 List of Fastest Growing Companies. A vibrant, energetic speaker, best-selling author of Wealth Made Simple (yes, really), businessman and Ironman triathlete, David Ragland understands and articulates the core ingredients that motivate, energize and push people across their personal finish lines.