How to Support Adult Children With Money

Make certain your child knows the terms of any agreement completely before transfering them any money.

Helping out adult children with money can be difficult unless handled systematically and on a business-like level. There must be a full understanding between you and your adult child about the reasons behind the need, the length of the need and whether the need is a temporary one or long-lasting. Communications is the key behind developing a way to help while still helping your adult child to achieve financial independence. With that communication though, you’ll be better able to create a plan that does just that, gives your child the help they require, while not allowing them to become dependent on you financially indefinitely.

Instructions

1. Sit down with the child and determine whether the money is intended as a short-term solution to an emergency situation, or if it’s a long-term support situation.

2. Create a plan with the child to have short-term emergency loans paid back. Establish concrete payment dates and amounts that the child can afford within their current budget before handing the money over. If the money is not to be paid back, establish this as well before the money transfer.

3. Create a budget with the child that includes all income and expenses if the monetary support will be more long-term in nature. Make certain to include monies for miscellaneous expenses, or any reasonable recreational expenditures made. Examine the difference in income and expenses to determine the level of shortfall your child is experiencing.

4. Check your own financial status to determine if you can afford to extend the loan or establish a stipend for your child. Create your own budget with income and expenditures to determine just how much you have available over your expenditures monthly.

5. Set a time limit for any long-term help. This tile limit should include a period of time agreed upon by you and your adult child during which they can repair their financial situation and regain financial independence.

6. Create a trust fund for the child if you possess enough money to afford to setup the stipend with a single payment. Place yourself as the trustee and the child as the beneficiary, with the stipend payments stabled in the trust fund documents, including the time limit agreed upon with the adult child. Sign the trust documents in front of a notary and then transfer the funds to the trust, placing them into a bank account established in the trust’s name. This will give you a somewhat hands-off approach to the payment of funds and keeps payments regular from month to month.

7. Put any agreements made between you and your child down on paper. Have the agreement signed by both parties to make certain that both you and your child understand the perimeters of the monetary aid given.

Tips & Warnings

• Have any trust agreement examined by an attorney to ensure that it does precisely as you intend.

References

• Smart About Money: Does Your Adult Child Still Financially Depend on You?
• Today; Help a Grown Child Who’s Grappling With Debt; Laura Coffey; May 2008