In an earlier article we discussed why you can’t rely on your kids for your post-retirement needs. That is at one end of the spectrum.
At the other end is a situation where your adult children (who should be capable of supporting themselves) become dependent on you for their needs. That is, they are unprepared to handle their finances on their own and regularly look up to you for help.
This discussion is not about children with special needs. It’s about adults who are fully capable of supporting themselves.
Helping your children in times of need would not be out of place. But when the frequency of such needs increases to the extent that it becomes a regular expense, then something isn’t right.
You would want your children to be independent. It’s true that ‘what-I-have-is-also-theirs’ kind of view is what parents have. And we cannot question that. But there is no denying that you would also want them to eventually understand how to manage money properly. After all, some day, they will need those skills when you are not around.
If your children regularly run out of money before the month ends, are unable to pay their credit card bills in full during every cycle, frequently find it difficult to service EMIs, etc. then there is something they are doing wrong. And if they take money from you to tackle such problems, their problem gradually becomes yours! And when that happens, remember that you will have lesser money available for your own critical goals and such as savings for retirement and uninsured medical contingencies.
Once in a while, you can pitch in for your children’s needs. But regular occurrences are a red flag. Either their expenses are unnecessarily exceeding their income or they are regularly failing to plan their expenditure properly. Such situations can lead to an unmanageable debt burden and other financial mistakes if not corrected soon.
Talking about money with children
You need to have a one-on-one interaction with your children about this. This discussion wouldn’t be easy, but needs to be done as early as possible. Here are some pointers.
- Are they spending most of what they earn every month? If yes, then do a sort of personal financial audit and dig deep on what they are spending on. This is a delicate issue and needs to be handled with care. On facing resistance, you can say that if they seek your money, it is only fair that they be asked to open their books to you.
- If you see money being spent unnecessarily and which reduces the amount available for actual important expenses, then show them the mirror.
- Tell them that you will help them out (if the need arises) only for the next 1-2 months. After that, they should be on their own even if they default on their repayments. This is a harsh step to take but at times, and in some cases, may be necessary.
- Also make them understand the need for setting aside some money for emergencies and unexpected expenses.
- Tell them that gradually, they should accumulate 3-6 months’ worth of expenses (including EMIs if possible) in their emergency savings. It might sound tough to them. And the fact is that it is not going to be easy for someone unable to manage his/her finances. But it has to be done. Ask them to (if nothing else) keep aside a fixed proportion of their salary for this emergency funding.
These are just a few points to ponder. Dynamics would differ across families and financial circumstances.
But the important point is that even if you as a parent are financially capable of helping them, you should ensure that they don’t build this assumption in their heads. You want your children to become independent and stand on their own feet. You have already done a lot for them by educating them. Isn't it?
As adults they must be capable of earning well and spending wisely. They must be trained not to turn to you for help to support their money misadventures. If it needs you to draw a line and take some harsh steps, then so be it.(The writer is the founder of StableInvestor.com)