Should I Give Money to My Adult Children?
May 16, 2025 - As parents, we often find ourselves pondering the most beneficial ways to support our adult children. Timberchase Financial fields questions about best practices to consider when giving money to them. While the desire to help our adult children is natural, it is essential to consider the implications of providing financial assistance. This discussion aims to explore the nuances of gifting money to adult children, ensuring that our support fosters independence and harmony within the family.
The Value of Self-Reliance
Reflecting on the resilience of previous generations, many built their lives without financial help from their parents. Their achievements were rooted in hard work, perseverance, and a drive to succeed. The “greatest generation” built the American economic engine this way. By allowing our children to navigate their own financial journeys, we provide them with the opportunity to develop similar resilience and self-reliance.
While occasional support can be beneficial, consistently providing financial assistance may inadvertently hinder their motivation to achieve personal and professional goals. It's crucial to strike a balance that encourages growth without fostering dependency. When helping, a question to ask is “Will this gift rob my children of the joy of self-achievement?”
When helping our children get started or re-started, my dad once said, “What you do will be done in the amount of time you have to do it.” If we provide financial support, it is good to consider if it is inhibiting the adult child from succeeding. It is not uncommon for financial help to have the opposite effect we intend. It is also good to ask, “Is my financial help an implied message to my child that I don’t have confidence in their ability to succeed?”
Ensuring Fairness Among Siblings
In families with multiple children, unequal financial support can lead to feelings of resentment and discord. If one child receives assistance due to immediate needs, it is worth considering offering equivalent support to the other children. This approach promotes fairness and prevents potential conflicts that may arise, especially after the parents’ deaths, because of perceived inequity of an inheritance.
Unconditional Gifting: Empowering Autonomy
When choosing to provide financial gifts, it may be good to consider doing so without attaching specific conditions or expectations. Designating funds for particular purposes, such as home renovations or education expenses, may be a subtle suggestion and inadvertently pressures the recipient to make decisions that align with the giver's intentions rather than their own needs or desires.
By offering unconditional gifts, we respect our children's autonomy and trust them to make choices that best suit their circumstances. This approach may foster a sense of empowerment and reinforce their ability to manage their financial affairs independently.
A no-strings-attached gift could come with the message, “Here is a gift for you because I love you and want to share what I have.” No other explanation is needed.
The Implications of Assisting with Major Purchases
Providing funds for significant expenses, such as a down payment on a home, is generous and common, but can have unintended consequences. While the intention is to offer support, it may lead to situations where the recipient overextends themselves financially, taking on obligations they are not fully prepared to manage.
Encouraging children to work towards such goals independently may allow them to develop financial discipline and a deeper appreciation for their achievements. It is essential to assess whether our assistance truly benefits them in the long term or potentially creates additional challenges.
Navigating Tax and Legal Considerations
When gifting assets, it is important to be aware of potential tax implications and legal considerations. Transferring appreciated assets during one's lifetime may result in the loss of a stepped-up basis at death, potentially leading to higher capital gains taxes for the recipient.
Additionally, financial gifts can impact eligibility for government aid or scholarships. It is advisable to be sure your generosity does not inadvertently step in the way of others helping.
Recognizing Unique Family Dynamics
Every family is unique, and certain situations may warrant a different approach to financial support. For instance, if a child faces significant health challenges, legal issues, or struggles with substance dependency, providing assistance may be necessary and appropriate. In such cases, it is crucial to develop a thoughtful and intentional plan that addresses the specific needs of the situation.
Additionally, some families struggle with a wayward child, and want to express that the child is loved, while at the same time not rewarding bad behavior. This is a complex dynamic for which there may not be a template solution.
Conclusion
Deciding whether to give money to adult children is a deeply personal decision. By considering the potential impacts on their independence, family dynamics, and financial well-being, we can make informed choices that align with our values and support our children's growth.
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Information presented is for educational purposes only and is not personalized investment, financial, legal, tax, or accounting advice. Nothing on this website should be interpreted to state or imply that past performance is an indication of future performance. All investments involve risk and unless otherwise stated are not guaranteed. Be sure to consult with tax, legal, accounting, and financial professionals about your specific situation before implementing any planning strategies. Investment Advisory Services offered through Timberchase Financial, LLC, a Registered Investment Adviser with the U.S. Securities & Exchange Commission. Registration does not imply a certain level of skill or training.