In uncertain times like these, we’re all feeling that desire to be there for one another. And since we are unable to be there physically, maybe we’re considering offering loved ones financial assistance. This is certainly understandable given the current pandemic, but in general, are you still helping your adult children financially? If you said yes, you’re not alone; in fact, a recent study shows that 74% of parents still help their adult children financially (*1).  Although it’s natural to want to help your children, it can be dangerous. If lending your adult children money is disrupting your retirement plans, here are 4 practical ways to cut the cord.

1. Have A Heart-To-Heart

Unless you openly talk to your children about finances, they may not know they’re setting you back. Sit down and have a heart-to-heart with your kids to give them a peek into your financial situation. Explain how giving them money has pushed back your retirement date or forced you to dip into your 401(k). This will likely be a difficult conversation, but they’re adults…they can handle it! Be as specific as possible to help them better understand why you need to cut the cord.

If your children are upset, phrase it in a way that benefits them. Let them know that your own financial security means they won’t have to support you during retirement. You’re doing this for them after all.  

2. Offer Support In Other Ways

Just because you don’t give your child financial support doesn’t mean you don’t support them at all. Ask how you can be there for them moving forward. Could you help them look for a job? Offer to help find housing within their new budget? Maybe walk them through how to negotiate a raise at their current job? There are many ways to help your child without handing over the checkbook. Make sure they know you’re still there for them.

3. Help Them Create A Budget

The first rule of financial security is spending less than you earn and saving the difference. If your adult child can master this, they’ll soon be more independent. Teach them the 50/30/20 budgeting rule that states 50% of expenses should go to needs, 30% should go to wants, and 20% should go to savings. Introduce them to a budgeting app that can help them manage their money straight from their phone.

4. Give Them Conditions

Don’t want to cut your kids off cold turkey? Give them conditions on how long and under what circumstances you’ll continue to support them. They’ll learn nothing if you hand over money without a thought. But if you introduce conditions, they’ll learn to be responsible. 

These conditions might include treating the money you give them as a loan. If they need money for rent, set clear rules on when they’ll pay you back (and even add interest if you want).

If your child is jobless and wants to move back home, set a time limit to how long they’ll stay and how they’ll contribute to the household. The bottom line is to make them earn the money you give them.  

Get Your Retirement Back On Track

We know that it’s hard not to doubt your decision to cut the money cord as you see your child struggle to make ends meet; but take comfort in knowing this is only temporary. You’ll be there to emotionally support them every step of the way, just not financially. 

And don’t underestimate the gift of teaching your children how to manage money. When they can set a steady course toward their own financial success, it helps them live within their means and helps you keep your retirement savings.

Our team at Cypress Wealth Services understands your challenges and worries, and we’re here to support you on your financial journey—and your children on theirs! We specialize in cash flow planning, debt management, budgeting and saving, and more. If you need help getting back on track for retirement, we’d love to help you create a financial plan that gets you there.

Let’s discuss your questions, concerns, and goals, and see if we’d be a good match. Contact one of our offices today to schedule an appointment. We look forward to hearing from you!

About Cypress Wealth Services

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.