Talk to your kids about money, don’t give it to them

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The parental playing field has never been level, because it was never meant to be that way.

Some parents have more time to spend with their kids than others. Some are more athletic, creative, musical, mechanical, demonstrative, intellectual or active than their neighbors and friends. Some have more money to spend.

It’s okay.

Your job as a parent is to do the best you can with the resources you have. You don’t have to be something you’re not, or spend more than you have to raise a healthy, happy family.

In the wake of financial challenges exacerbated by this global pandemic, you might be tempted to stretch your own financial resources to help your children out. 

For instance, you may think you should mortgage your own home to help them buy theirs, deplete your emergency fund to take care of theirs, dip into your retirement account to fund their education.

We encourage you to avoid these seemingly loving financial gestures. Loaning or gifting your children money is fine if you have those funds to spare. But, risking your own financial health to solve your children’s financial troubles could backfire for you in the long run. Those very children you protected so diligently during years they could have scaled back their lifestyle or stepped up their earning power, may end up resenting you later on.  If you run out of both money and the means to acquire it during your retirement years they probably will have to jump in and help you out. Nobody wants to see that happen.

Sitting down together and discussing ways to solve the financial difficulties, or better yet, helping your children acquire the financial skills they need to avoid financial stress in the first place, will be much better for all of you in the long run.

Remember, you can apply for a loan to fund college or the purchase of a home, but you can’t take out a loan to fund your retirement.

On that note, we also advise parents to avoid co-signing loans for their children because we have seen too many cases in which the circumstances that led to the adult children taking out the loan also forced them to default on it. Then their parents are left paying the bill — usually out of their retirement account.

The best gift you can give your children is an understanding of their financial decisions and the lasting impact they make. 

Talk to your kids about money, and don’t feel like you have to give it to them.