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Is Your Adult Child Financially Dependent on You?

Adult child with the family dog financially dependent on her parents.

You’ve nurtured, raised, educated and set your children off on their own. No, it’s not déjà vu — your adult child is back. Are you prepared to welcome your son or daughter into your home — and wallet — again?

A recent survey finds 59 percent of parents are providing, or have in the past provided, financial support to their adult children when they are no longer in school.

How are parents helping?

  • 50 percent are providing a place to live.
  • 48 percent are helping with living expenses.
  • 41 percent are helping with transportation.
  • 35 percent are helping with health insurance.
  • 29 percent are providing spending money.
  • 28 percent are helping with medical expenses.
  • 19 percent are providing emergency money.
  • 16 percent are assisting with loan repayment.
  • 10 percent are helping pay down credit card debt.

If you're providing a financial cushion for your adult child, a little patience and understanding and some ground rules could make a world of difference for you both.

Engage in a Serious Conversation

Understand where your child is coming from. This will allow you to make an informed decision about whether you want and/or can help them through a rough spot.

Examine your own financial situation. If helping your child means you won't be saving as much as you had hoped for your retirement or another important financial goal, you might reconsider.

Establish a plan. The more seriously you take the situation, the more likely your child will. Draw up a written contract, and if you have a financial planner, find out what he or she would charge to work with your son or daughter.

If you are loaning money outright, consider charging a small interest rate. This will encourage your child to repay the money in a timely manner and avoid borrowing as much as possible in the future.

Set a time limit. Before giving your child a loan or allowing them to move back into your house, work together to decide exactly how long the situation will last.

  • If you are giving your child a stipend each month, elect a date by which they will be financially independent again.
  • If you are loaning money, establish how much time your child has to repay the loan.
  • If your child is moving back into the house, decide on a move-out date, just as would be stipulated on an apartment lease.

If you agree to pay off your child's credit card debt, insist that this is a one-time offer. If your child believes they will be bailed out every time they can't pay the bill, they may never learn the risks and rewards associated with credit.

Require an adult child who lives at home to help with household responsibilities — financial and otherwise. You could charge a small amount of rent to help pay for household expenses. This tactic will encourage your child to save and remind them that the situation is temporary.

If you cannot provide financial support, consider other ways to help:

  • Offer a used family car that you no longer need.
  • Draw on your professional connections to help him or her secure a higher-paying job.
  • Watch grandchildren or pets so that your child can actively apply or interview for a new job and/or work extra shifts.

Lead by example. One of the best ways to help your adult child live a healthy financial lifestyle is by demonstrating the behavior you would like them to emulate.

Turn the Situation into a Life Lesson

Once your son or daughter has met their financial goal — whether it’s repaying his or her debt, finding a job or saving enough to be out on his or her own — celebrate this accomplishment. Then, make sure everyone involved learned from the situation.

  • Engage in an open and honest discussion about the lessons you both have learned from the experience.
  • Take the LifeValues Quiz together to better understand what is behind your son or daughter’s financial decisions.
  • Encourage your child to take the necessary steps to prevent a repeat of their financial difficulties in the future by creating a spending plan.

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by National Endowment for Financial Education.]