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5 Questions To Ask Yourself When Your Adult Child Asks You For Money

Team BankBazaar


As a parent, you may have faced your own financial issues and yet worked hard to provide the best to your children. Now, when it is finally time to focus on repaying your own loans and planning a sound retirement, you may still face situations when your adult children ask you money. Naturally, you may be overtaken by your instinct to help. However, you can deal with such requests better by asking yourself these 5 questions before taking the next step.

Is It A Recurring Demand?

If your adult children have a track record of turning to you in times of financial crisis, think again before coming to the rescue. You can consider helping them out in one or two rare instances, when they are just starting out in their career, need financial help to secure a profession or have a financial emergency due to which they are falling short of funds. However, if this is a recurring demand, it is highly possible that your children are mishandling their finances and it is time to refuse financial aid for their own good. Instead, give them a few tips on how to manage finances effectively for securing their future.

Why Do Your Adult Children Need The Money?

Ask your children why they need the money. Is it for a genuine reason or an emergency? If yes, you may probably not have the heart to refuse. But, your next step should be to encourage your child to save for emergencies, be it receiving a pink slip or facing an unexpected medical need. Suggest other means of tacking such situations smartly, be it by getting health insurance or investing in an emergency fund on their behalf so that they improve financial position.

However, if your child needs the money for reasons like acquiring an asset, you may offer help by loaning an amount or becoming a co-signor on a loan. Also, a clever step would be to assume a joint ownership on the asset, like a car or home, until they repay the loan successfully and then transferring ownership to them.

Does This Impact Your Own Financial Wellbeing?

You may have an educational loan to repay, a home loan to service or other responsibilities like saving for retirement. So, before giving your adult child money, ask yourself how this move will impact your own finances. Will it mean dipping into your savings or cashing in on investments? Will it affect your retirement savings? If yes, your answer should be no.

Remember that you are approaching your retirement and don’t have enough time to replenish the amount you had planned for. Your child, on the other hand, can dip into their savings and earn it back in the near future. If at all you are bent on helping on, you may help them to tap alternate sources of funds or consider loaning them the amount on mutually agreed upon terms.

Should You Gift Or Loan The Money?

It is not worth sacrificing your own retirement and helping your adult child monetarily. There can be exceptions like medical emergencies when you cannot refuse. However, on all other occasions, hold back. Look at it this way: You have already done your part by educating them and it is now their journey and so are the challenges that are bound to come up. So, if you are gifting them the money, ensure it doesn’t negatively affect your own financial planning and do consider gift tax. If you are giving them a loan, don’t hesitate to create an agreement.

Should You Loop In Your Family?

Looping your family in this situation may be a smart move. In fact, it will keep your adult children on guard and prompt them to repay your loan in time in order to avoid creating any family rifts.

As a parent, you may feel obligated to offer financial bailouts to your children. But, remember that they are adults. If you don’t side-step now, your help may prove to be a potential danger to their financial lives. So, take a step that safeguards your interests and theirs.