When Do You Cut Off Kids Financially?

When Do You Cut Off Your Kids-Financially_

I’ve been reading a lot of articles lately about parents continuing to support their adult children.

As the mother of three boys of varying ages – fifteen, eleven, and three – this is a topic that greatly interests me. After all, my fifteen-yea-old son is a sophomore in high school. In just a few short years, he’s heading off to college. That means I’ll soon be faced with the decision as to when to cut the proverbial cord.

Also, some of the articles that have come out talk about thirty-somethings still being dependent on their parents. I’m thirty-something. And I haven’t been dependent on my parents for almost twenty years now.

Our ultimate goal as parents is not to raise good children. It’s to raise children that become good adults. We want our kids to be productive members of society, and we don’t want them to depend on us forever. After all, one day we won’t be here anymore to shepherd them through life.

To set our children up for success, we need to think about how we can help them stand on their own two feet out in the world. We also need to think about ourselves, and our own long-term needs. After all, many of us also don’t want to set our kids up for an adulthood filled with being part of a “sandwich” where they need to financially support us in our old age.

So today I’m going to talk a bit about cutting the financial cord with your kids, and ask for your best tips – or what to avoid. Read on and be sure to leave a comment.

Parents Aren’t Putting On Their Oxygen Masks

In the US, where many can’t handle a $400 emergency, and half of people have nothing for their own retirement, many can’t afford to financially support their adult children while ensuring financial security for themselves.

And yet, many who can’t afford it do it anyway, to the detriment of their own financial situation.

In fact, a survey from Merrill found that parents support their adult children to the tune of $500 billion per year – twice what they’re saving for their own retirement. Seventy-nine percent of parents provide some kind of financial support to their adult kids. Three out of four put their kid’s interest ahead of their own retirement. Sixty-three percent have sacrificed their own financial security for their kids.

Look, we all love our children and want what’s best for them. But if we’re not taking care of ourselves financially, we’re not setting them up for success in the long run. And parenting is all about the long run.

You know how on airplanes they tell you to put on your own oxygen mask before helping your kids? That’s because if you’re oxygen deprived, you can’t help your children. Putting on your own mask ensures you won’t pass out before you can help your children, potentially saving both of you.

The same is true financially. Funding your kid’s groceries, cell phone bill, wedding, and so on shouldn’t come at the cost of your own secure financial future. Why not? Because one day, you may need that security. You may require expensive nursing home care. You’re likely going to be racking up a ton of medical bills at some point.

Basically, you’re going to need money.

Now, if you can afford to help your kids and still have a secure financial future, that’s great. But it’s not the only factor to consider.

Helping Can Hurt Them

I remember reading in The Millionaire Next Door (one of the four books that changed my financial life) a long time ago about a concept called “Economic Outpatient Care“. That’s a fancy term for providing financial support to your adult children, and several of the stories stuck with me.

There were stories about adult children who were so used to getting payouts from the “Bank of Mom and Dad” that they skimped on using their parent’s money to pay for quality end of life care. Why? They were terrified of the money running out.

There were children who received, and quickly burned through, inheritances. Why? Because they needed the money to maintain the lifestyle their parents had bought for them in life. And once the money ran out, those children were in for a shock, and a forced lifestyle downgrade (or funding life through debt instead).

There were stories of well-meaning parents who had put down payments on, or outright bought a home for, their kids. Said home was totally out of their children’s price range. This came with expectations of a “certain type” of keeping up with the Joneses their kids simply couldn’t afford. And so, the kids came right back to the Bank of Mom and Dad.

Stories of parents who had bought their adult children a fancy object – I think it may have been a rug? – and their children now felt the Diderot effect of pressure to upgrade everything else. Because all their old stuff looked shabby next to this beautiful new thing.

When you fund your adult children’s lifestyle, or buy them into a higher lifestyle than they could afford on their own, you may be doing them a disservice. Not only are you increasing the chances they’ll become dependent on you, but you also may be setting them up in the long run to live a life they simply can’t afford.

A Question Of Culture

The question of how much financial support parents should provide to adult children always has a cultural aspect to it.

As a woman who grew up in the United States, the value of independence and not accepting help was drilled into me at a young age. Now, this isn’t true of all people with my background. I’ve known plenty of people who come from a similar background who have parents providing a ton of support.

There are certainly cultures around the world where parental help and support is expected, and where children are similarly expected to support their parents in old age. In some countries (Korea, for example) this cultural expectation is enshrined in law. Also, there are cultures where it’s expected adult children continue to live with their parents until they’re married. And the concept of multi-generational living, where parents and adult children with their families live together, is also typically a question of cultural background.

So What To Do – And When To Do It?

When I read about parents who are overbearingly intrusive into their adult children’s lives, or snowplowing their way through every obstacle on behalf of their kids, I know that I don’t want that to be me.

I would never want my kids to starve, of course, or to feel like they don’t have a place to come in an emergency. And I want to start them off in adulthood right.

I want them to have reasonable expectations for the kind of lifestyle they’re going to lead out of college. It’s not reasonable to expect you’re going to live the same kind of life your parents have spent decades creating. There’s a reason that the stereotypical image of a college student is one where they’re eating ramen, and why people typically live with roommates the first few years out of college.

I don’t want to hurt my kids by allowing them to do nothing, to fund a lifestyle they can’t afford, or to foster a sense of entitlement. And I certainly don’t want to hurt them by compromising my and my husband’s finances. That will just come back to hurt my kids in the long run, and I don’t want them feeling the pressure of a financial sandwich where they’re paying for their own children and supporting us at the same time.

So as my oldest approaches the age where he can get a job, drive a car, and soon head off to college, this is an area where I’m giving serious thought. I’d love to know what advice you have!

Comment Below!

This is such a thorny question, and I would love advice from fellow parents who have been-there-done-that, young adults who have seen what worked (or didn’t) with their own parents, or have given some serious thought to these same questions.

  • What did your parents do that worked particularly well in setting you up to succeed on your own as an adult?
  • What could they have done differently, or better?
  • What are you planning to do, or actually doing, with your own adult children?
  • What issues have you seen in your own life – with friends, siblings, co-workers – where parents have provided too much financial support? Or not enough?

I’m looking forward to your advice and stories.

15 thoughts on “When Do You Cut Off Kids Financially?”

  1. I’ve known how to balance a check book since I was in Jr. High thanks to my parents. They set my siblings and me up with savings accounts and taught us how to use credit cards, making sure we understood the expectation was it had to be paid off in full at the end of the month.

    I’m not dependent on them at all, but they are financially stable enough to help out on occasion. When I say help, they front cash for a major expense and we draw up an agreement on how we pay them back. For example, when my husband was in a car accident that totaled our van (no injuries!!) we went out to get a new car. My parents offered to pay cash for it so we didn’t have to work through a loan provider and we gave them our insurance check as a down payment then set up a schedule of payments.
    We are extremely privileged that they are in the position to do that.

    I’ve already set up savings accounts for my kids (under 10), and when they get cash gifts from family most goes in there (with some set aside for charity) and we will help them plan out bigger purchases if they want to get something beyond what we’re willing to buy them.

  2. Much like you, my parents encouraged independence. As I went off to college they told me if I wanted to go to community college in town (I did not) I would have to pay rent. Although I was on my own for college costs they very graciously told me they would pay $300 in rent for me a month. Guess what my highest rent was in college? This worked out well for me, encouraged me to leave the nest, be responsible for my own education (which encouraged me to get out ASAP) and still alleviated some of the pressure financially. I will be forever grateful to my wise old parents for the push and support.

  3. My mom tried to encourage saving, put me through undergrad, and have let me live at home while paying off over $52,000 in student loan and credit card debt. I wish my mom would have actively talked way more about money, saving, investing, and so forth. I had no real idea how much it cost to live since she took care of so much. If I have children, I will encourage them to keep a savings account that we will use to regularly track their savings. In addition, I will make them “save” for things they want. If they want a toy, they will have to save for the item themselves. I will ultimately pay for it but they will have to show diligence and sacrifice in order to get what they want. Hope that makes sense! Great post.

  4. TheFinanceTwins

    Great article! As new parents this is a fascinating topic for us! Like with most complex topics, the right answer here is probably “it depends”.

    If you have a child who is pursuing a PhD or M.D. (careers with notoriously long training periods), and won’t be starting their career until their thirties, I think a little financial help could go a long way to avoid burn-out or crippling debt burdens.

    At the same time, the question of parity comes into play with multiple kids and you never want to be picking favorites.

    And finally, the means that parents have may be the most important factor. If the parents have the means to save appropriately for their retirement, then they have more flexibility in how much or how little support to provide. At the end of the day, we think that the impact the money will have will depend on many factors that start to get established from a young age.

    Definitely an interesting topic to think about and discuss.

    The Finance Twins

  5. My siblings and I have different relationships with money, despite being raised in the same house. I picked up on the message of saving. I am grateful that my dad offers $ support by way of being a sounding board regarding the stock market. As the comment above, mom and dad have both offered assistance, for temporary situations. Dad helped me get a car loan through his work credit union, for a much better rate than the dealer or a bank offered. But _I_ paid the loan. I was going on a road trip, and mom lent me money to have cash on hand, just in case anything happened to the vehicle. I returned it to her untouched when I got back.

    Recently dad, my step-mom, sister & I went out to dinner. My sister didn’t even bring her wallet.*shrug* My brother is somewhere in between.

  6. I have a somewhat blended family and we all came out with different attitudes about money, mostly due to our different ages. I saw the poor side of entrepreneurship in my father’s business, which was successful, but wasn’t enough for 6ish dependents. I started college highly risk adverse, which helped keep my student loans under $7500 total, but resulted in wasted time when I landed a job (as a student!) with a 401k. My parents don’t have retirement savings, so everything concerning strategies and max contributions, I’ve had to find out on my own. It’s been a slow process and I kick myself for the early days. My parents are not a model of financial health, but they supported independence, experiences and acquiring skills. They were always there to ask critical questions and provide advice in other areas. My mom is the reason I’m an engineer and not an electrician. In the end, I think healthy relationships with easy dialogue is the most important. I think you’re doing a great job, approaching this from a thoughtful, open and loving perspective that your kids seem to be responding to. Definitely look forward to using this blog as inspiration for my kids in a few years.

  7. this is such a wonderful post. since neither my husband nor I received any financial training at home or school, we have learned the hard way and have made so many mistakes. so we are teaching our kids to be financially responsible.

  8. My parents never talked to us about money so I had to learn on my own. My sibling and I knew that we didn’t want to end up like mom after the divorce so we’re hard workers and very independent, and we’re not too shabby with money. I balanced mom’s checkbook and wrote out all of her bills while I was in high school (I’m so glad I took accounting and economics) since she dreaded that task.

    We have a 15 yr old and 12 yr old, and as of now, they both know what majors they want to pursue. We have discussed some of the local college options (we have plenty in our area), and they are both happy to go to any of them. I already stressed to them that since we’re paying for their education, and they’ll be living at home, that they need to get in and out of school ASAP (no 10 yr plans). I’m assuming they’ll both want part-time jobs (during college) for spending money since we make them pay for (with their tiny allowance) for any electronics/games/concerts, etc.

    I was honestly going to come up with a powerpoint presentation to show them some money basics…checking/savings accounts, how to budget, how to automatically save, how to use credit cards correctly (for travel points…they love staying at nice hotels), retirement accounts, and investing in index funds.

    Oh….and if my kids decide to live at home after college, I already told them they’re paying rent and still doing all of the chores plus some more since they’ll be adults. They’ve seen what slackers some of our friends’ adult children turned out, and they don’t want to end up like them.

  9. I come from a different cultural background (Europe ) and it was clear to me from the start that my parents would do three monetary things for me as an adult:1: Pay for my university education (school fees and low-budget cost of living) including one term abroad in an affordable country, 2: pay for my wedding, and 3: pay some money towards a house down payment. Their parents did the same and they wanted to pay it forward. The expectation of course was to do my best at university and to pay for fun things by having a part-time job. I am grateful for them financing my studies as this allowed me to excel despite a very time-intensive curriculum in my dream field of studies. Regarding the wedding and the house it was easier for me to accept these gifts because we could also have afforded them on our own. I plan to pay this forward to my kids as my parents did for me. By the way, my whole extended family has this approach and my husband’s family is similar. Even my grandparents were helped by their families regarding education, wedding and house so I would say the approach is time-tested and I would be very ashamed if I couldn’t do the same for my kids. Note that my family made it a priority to provide this support within their means and without sacrificing their own financial stability. And, of course my brother received the same as me.

  10. Kids can turn into responsible adults even if their parents provide them with a fair amount (but not an extreme amount) of support. I think the role of financial education and demonstration of financial responsibility in the home are at least, if not more important.

  11. The whole idea of not having kids work, because studying is their job, is so incredibly foreign to me! I know some people’s majors require more hours than others, but working gave me such a huge leg up over other people in college.

    When I arrived at college, my mom gave me $300, which I quickly burned through in one semester. It didn’t occur to me to ask for more, because I would have felt bratty. So I worked throughout the rest of my college career. I wasn’t really concerned with what other people were doing, but I remember my mind being blown when I found out some kids didn’t have to work part-time jobs at all. Their parents would put money on ID cards each semester, which they were free to use however they wanted.

  12. I know my kids will have a different experience then I did since I am already teaching them now more about money then I had. I know this will give them a huge leg up.

    I went to a local college stayed home while I went to school and my parents told me I could finance a car loan. So at 18 years old I had school loans a car loan plus a small credit card. I didn’t understand the school loans since they were deferred. Thinking back on it. Wow! That was a lot of debt at 18! I was told to keep a credit card balance so I could build my credit. That is how my father saw it.

    Saving was something my parents taught me at a young age. At 18, I had a lot of savings even though I had debt. I probably could have paid off the car loan faster. My parents both emphasize hardwork and having a part time job. I started babysitting at 12 and did office jobs over the summers at 15. Then had a 20+ hour work with a full school schedule at 18.

    Any money I earned was mine but I had to pay for my car loan and anything I wanted like eating out, and extra activities. I had to pay for most of my school supplies.

    I saw so many classmates and sorority sisters that had parents that paid for everything and always helped them each month. They didn’t work.

    I know my grades would have been a tad better if I didn’t work but I also had a leg up since I did work and made good connections. It was true having the experience helped a lot!

    My father passed away suddenly and so I helped my Mom go through all of the finances. They didn’t save as I assumed they did. I learned a lot about finances and family during that time. Even our family wasn’t there to help us.

    Since I was a good saver I had thousands in the bank after I graduated. I paid rent to my Mom for a short period. I didn’t ask for any help even though she would be happy to help, if she could.

    At 22, my husband and I bought our first house right out of college and got married. We had a frugal wedding.

    I love this post since out history will be different then theirs. We can’t predict the future. My mom’s history is so different then my own. College costs were so much higher when I went compared to her and now my kids will be even higher.

    My goal is teach them to be independent and start having the tools and knowledge now before they head off to college. They can make mistakes with me and learn from them.

  13. This addresses a lot of stuff I too have been considering (my daughter is 13 and finishing 8th grade).

    I do not want her to be economically dependent on me and when she is an adult she should have to stand on her two feet financially otherwise will not learn the hard lessons early on when there is still time to recover from mistakes.

    I think this will be easier said than done because I have no idea how I would feel and handle a situation where she comes asking for money. But I have made it clear already that the money she sees me having is my money and that if she wants a similar lifestyle to what I have, she has to make sacrifices just like I did early on.

  14. My parents made my sister and I live at home for undergrad but encouraged us in master’s programs and supplied some money to help living expenses during our masters. We are in Canada and we both got decent scholarships and they covered the remainder of tuition. My tuition cost them 27,500 over 7 years and I paid for my books, bus pass and fun while at home They also gave me $2500 a year for 3 years during my 2 masters to help with rent and groceries. I worked part time throughout.

    My first post-uni job was on such a short contract originally (4 months in a rural community 40 minutes from where my parents lived) that it just made sense to live at home during it because I might have to move cities afterwards and otherwise break a lease. They also helped me
    buy a car ($3000 plus my mom’s negotiation skills towards a $10000 car)

    After I moved away again at 26, I didn’t receive any financial help until a bad breakup. They gave me an old bed and chairs from their basement and paid for half the cost of moving a uhaul to drive it to my city. They later bought me a coffee table and chair for my new place.

  15. It’s going to sound strange, but looking back at it now, I am so grateful that I did not really get much in the way of financial help from my parents/grandparents in my early adult years. Yes, my grandfather did let me come home for three summers during university and live rent free to save for the next year, but ever since I left home at 18, I have been responsible for everything related to my finances and have received very little in the way of help – not for lack of wanting on their part, but for lack of ability. I credit this with helping me form good money habits.

    We aren’t parents yet, but if (well, hopefully when…) we are, I do hope we will be able to do a little more in terms of being able to provide financial support to our kids. That said, though, we are both strongly of the opinion that we want to teach our kids early how to be responsible with their own money – and parent of that will be making sure they know the Bank of Mom and Dad won’t fund a lifestyle that is not sustainable.

    Of course, that is easy to say when you don’t have kids yet, so we’ll see how it all turns out 🙂

    This was an awesome post – definitely got me thinking.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.