VOL. 128 | NO. 228 | Thursday, November 21, 2013
Rays of Wisdom
Dana and Ray Brandon
How to Handle Your Child’s Financial Trouble
By Ray and Dana Brandon
Ray’s Take You’ve finally reached the point where your children are grown and launched, and are looking forward to a secure retirement, or at least a slower financial headwind. Suddenly, catastrophe strikes one of your kids. Should you help, even if it could jeopardize your own future?
A lot depends on the nature of the problem. Every situation is unique and there are no pat answers. However, it’s wisest to proceed with caution.
According to the AARP, people over 55 are in the group most likely to declare bankruptcy. Medical expenses and debt are factors in this, along with giving money to adult children. Too often parents are so anxious to ride to the rescue they wind up putting themselves in financial straits.
Obviously, if a child is suffering from a debilitating illness, you’ll want to help and should. But in many circumstances, you might want to think twice.
A divorce, loss of a job, or some other major financial setback is something almost everyone faces at some time. A knee-jerk turn to parents for help could be a sign that the adult child was not engaged in wise financial planning to begin with – there was no emergency fund or savings to fall back on.
In cases like these, you can offer support without necessarily opening your checkbook. Just listening can make a big difference. Through active listening you may pick up problem-solving ideas or be able to make useful suggestions. If suggestions are ignored in a search for fast cash, a handout may be the worst thing you can do.
You could find a professional financial resource to help your child through the situation, or enroll him in a financial planning seminar. If you feel you absolutely must contribute financially, have a clear understanding of boundaries. Remember, though, the best help is often to counsel and encourage, and refrain from offering a bailout.
Dana’s Take Teen and young adult messes get costly – cell phones break and cars get wrecked. If we show our kids that their mistakes are our problems to fix, they may never stop sending us the bills for their disasters – and worse, they may never grow up. It’s hard to stop swooping in to the rescue, I know.
As a responsible parent, it’s up to you to cut those financial apron strings so your children will focus on their problems and think seriously about how they can solve them. This is the only way they’ll develop the financial management skills they need to succeed in life.
The sooner your kids learn those skills the better. If they seem to be floundering, you can provide guidance, but providing cash gifts or loans will not only keep them from figuring out how to handle things on their own, ultimately it could put a major strain on your relationship.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.