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What To Do if Your Adult Child Asks You for Financial Help

This article appeared in the April 2019 edition of Nevillewood Living.

Money – a positive source of opportunity, choices and time – can often
also be the source of anguish and conflict. This is especially true for
families whose members may view money, and spend it, differently. The enormous
sensitivity that can build around a person or family’s wealth is not surprising
– this is wealth that has often been earned with hard work or was inherited as
a legacy from an older generation. Most people just want to take good care of
that wealth and do right by that legacy.

As this is, rightfully so, a deeply personal decision, extra care should be taken when handling a situation in which your child might ask you for money. There are countless reasons they could be approaching you, and therefore equally countless ways you could respond to them. Before your response, though, there are a few considerations to be made: Is this a one-time ask, or has it become a habit? What will the money be used towards? Would giving them financial help impact your own immediate cash flow, or even your retirement?

If, after asking these questions, you feel that the right thing to do is to help them out, the following are some of many options you can pursue depending on the situation:

  1. Gift the money to them outright.
  2. Loan the money to them, and draft a formal agreement
    that lists out the details of the loan.
  3. Contribute to a 529 or other educational savings
    vehicle – if help with their own child’s education is the reason (ideally done
    years before the child starts school so the investments can grow tax deferred).
  4. Pay the college or medical institution directly. This
    will result in the transaction not being treated as a gift, and therefore gift
    taxes can be avoided.

If you feel that giving money now is not the way to go,
there are other ways to help them out.

  1. Fund a trust that allows them access to the money at
    a later age based on certain financially responsible conditions.
  2. Help with your grandkids’ activities, or other
    time-consuming aspects.
  3. Help them in networking and in finding career

Sometimes what they might need, more than a specific
dollar amount, is support and guidance, which only you can give to them from
your own experiences, failures and successes.