Should You Provide Financial Help to Your Adult Children?
Raising children to become financially responsible, independent adults is a goal most parents share. However, economic conditions, personal circumstances, and unexpected events can make it difficult for young people to get started on the right financial footing. That can make it tempting to step in financially to help bridge the gap for children who may be struggling with student loan debt, sky-rocketing rents, and stubbornly high inflation, among others. But should you? The answer may depend more on where you are in your journey to and through retirement than your children’s financial circumstances.
According to a Savings.com survey, 52% of parents providing financial support to an adult child plan to retire within the next 10 years and 34% are already retired. Among those providing support, the average monthly total exceeds $1,400 across spending categories, including healthcare and auto insurance, groceries, rent, cellphones, tuition, and travel. The survey also found that 21% of parents are helping with their kids’ student loan payments. On average, they contribute $245 a month to help relieve the debt.1
How strong is your own safety net?
Before committing to provide financial support to a family member, you want to ensure that doing so will not jeopardize your own financial health. Consider the following:
How you give matters
Fortunately, there are many ways for both parents and grandparents to provide financial help to adult children and grandchildren. If you’re in a position to do so without derailing your own financial strategy, there are many tax-smart ways to help you accomplish your goals, including:
Finding the right balance
Your tax, legal and financial professionals are well-equipped to help assess the impact that providing financial support to family members may have on your current strategy and legacy goals. With the help of sophisticated software, financial professionals are able to model different scenarios to illustrate the impact that a one-time gift or ongoing support may have on your ability to meet each of your goals in a tax-efficient manner. That can help you find the right balance between pursuing the goals you have set for yourself and helping the people you love.
To learn more about tax-smart strategies to help meet all of your family’s needs and goals, let’s talk. Call the office to schedule a time that’s convenient for you.
1) Klongpayabal, Beth, “45 Percent of Parents Still Cover Costs for Their Adult Children.” Savings.com, 22 MAR 2023, https://www.savings.com/insights/financial-support-for-adult-children-study
This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.