SESSION 5: Money, Money, Money

Thanks for joining us for Session 5 of Doing Life With Your Adult Children. Today’s conversation is all about money, money, money. Every parent of adult children can identify with the struggle of wanting to encourage financial independence while also desiring to help their kids when necessary, but just when is it appropriate? And how can you better prepare your adult children for financial freedom? In this week’s session, Jim guides us into valuable insight and gives us helpful tips for this sometimes awkward aspect of relationship with adult children.

So your adult child should not become the money pit. I know the money pit was about a house, but some of us have adult children where it’s also the money pit. For some of us, it sort of feels like that at times, obviously. Today’s conversation is going to be practical. It’s going to be action oriented. So get ready, take some notes. Here we go.

First of all, keep the end in mind. You hear me saying this a lot. Financial responsibility and independence is the goal, so keep that in mind. Now in doing that, know that 75% of parents actually help their adult children at some time. So if you are helping your adult children, you’re not alone. Okay. Develop a plan with an exit strategy. Too many parents start putting money out and they don’t have a plan and they don’t have an exit strategy. So develop that plan, develop the exit strategy and just know this, that many times saying, “I love you,” means saying, “No.” Even if you have the money, it still is not the best thing for them. So, “I love, no.” Okay. And remember that the high cost of money to a relationship is huge and don’t make it complicated.

Okay, so how do you avoid paying for your kids forever? There are people who have done this forever and they probably need to learn some of this. Foster their independence, ask, “Will providing money, help my child become self sufficient or prolong the dependence on us?” That’s a question we’ve had to actually ask on some key things.

Distinguish between needs and wants. Just remember when they were little, they had what they said were needs, but they were really wants. I need ice cream. I want this, to go to Disneyland, things like that. Well, you know what? We have to help distinguish that and that’s not always easy.

And then set clear parameters. Be clear as possible and give according to your needs. I mean, don’t make yourself financially vulnerable by bailing out your kids. In fact, I know somebody who their kids really wanted a house, they actually went into their retirement savings. They helped them get their first house, which was really a dream house and more than the parents. And then what the parents had to do, was not retire because they had to keep working because they were in such financial dire straits and the kids didn’t need that fancy house. So, give according to your needs and don’t apologize for that.

Now, one other thing that I think is important for parents to deal with when we’re talking with our kids about money, is actually become mentors for them. Teach them, train them about a good financial stewardship. So make sure, first of all, that you talk to your kids about money. It’s awkward sometimes, it doesn’t fit if you have no money, still keep talking about money. And if you have lots of money. I’m aware of a family that actually was worth $300 million and they ended up dying and they left all $300 million to a foundation, and the kids got none of that.

Well, they could do whatever they want with their money, but now the kids are all mad and they’re suing the foundation and they’re angry at each other and they’re angry at the parents. And the parents could have easily said, look, you’re not getting any of our money, but they weren’t willing to do that. So, talk about it and actually look at yourselves now as mentors, they need mentors with financial stewardship. And I’m not saying you’ve done it perfect. No mentor is perfect, but mentor them. By mentoring them what I’m trying to do is say, “I want to teach my adult children healthy stewardship.” So things that we teach and this is not our own stuff, we get this from other people. “God owns it all.” That’s what we say to our kids.

There is no such thing as independent financial decisions because they blend with everything. Now, one of the things we’ve tried to teach our kids is delayed gratification is the key to financial maturity. Now I’m not a financial planner, I’m just saying, “Hey, if I delay my gratification and I don’t spend it on something that I don’t have, then I’m in the long run going to be happier.” And that’s a hard one for kids to understand.

So in other words, spend less than you make, duh. But if we could get that across to our kids, it would help a lot. Especially, because so many struggle with things like debt. And what I want to teach our kids in terms of mentoring them as debt is not healthy stewardship. Because not only are they going to have the strong debt, but let’s say for example, when they get married.

You know, 26% of marriages derail because they say the number one issue is that they’re arguing over money. Well, part of that is because of debt. So teach your kids to be as debt free as they possibly can. And I say to my kids, and I say this in premarital counseling and everything else is, a budget as a must.

So teach your kids how to do a budget. They don’t know how to do that. So teach them how to do a budget. You may need to do a budget before you give them the budget tool. And we’ve always taught our kids, if you could just make this a principle, give 10% save 10%. I know very few people who give 10% and save 10% no matter what their income is, who actually don’t have better stewardship than others, it’s because they have it down. So teach them that. Lastly, deal with the complications ahead of time. So money doesn’t become a block, an issue, a wedge in the relationship with your adult child.