How Much Financial Help Should We Give Our Kids?

By Greg Major, Director, Blueprint Wealth*

Youth unemployment is an area of concern in the economy at the moment and the job prospects for young people are grim, according to new figures that reveal youth unemployment is hovering around 28 per cent.

If you’re the parent of a grown child who is struggling to leave the nest there are ways you can help them get a solid financial start in life that won’t break the bank.

The latest AMP.NATSEM Income and Wealth Report, We can work it out: Australia’s changing workforce, reveals unemployment is particularly high for young people who are looking for full-time work, at 4.5 times the national average.

As a result, young people are financially dependent on their parents longer, whether that means continuing to live at home or relying on some other kind of financial support from mum and dad.

So how can you help your kids?

Firstly, review your own financial position. It’s often too easy to say, “I’ll pay for that for you” but don’t be embarrassed if you can’t afford it. Sacrificing your own retirement funding by helping out the kids might compromise your future quality of living.

Communicate and make sure you really understand your child’s financial predicament. They might just need one off help with a bill or they may instead have a more systemic saving and spending problem.

Like a bank, lay down some ground rules. If they went to the bank they would have to be disciplined and responsible. The “Bank of Mum and Dad” should be no different. In the case of a family loan, document it and set up a schedule of repayments that both parties are comfortable with. It might sound like tough love, but you don’t want this turning into a regular occurrence and creating friction between siblings.

For those children who have moved out and are struggling to make a go of it, welcome them home and turn that study back into their bedroom, but think about what contribution they can make. Paying a small board to Mum and Dad is a lot cheaper than paying rent. And having a child back at home means you can call out, “Gee son, the grass is getting long. You remember where the mower is, don’t you?”.  But don’t let them stay forever!

If you run your own business, can they help? There might be a few odd jobs they can do. So bring them in, put them on the payroll and invest in your kids.

If you use a discretionary family trust and they are beneficiaries, you may elect to make a distribution to them from time to time to help out.

If your estate planning is up to date, perhaps you can afford to distribute some wealth today rather than leaving them a legacy. A lump sum right now might just be the recipe to clear their HECS debt or accelerate that jump from the rent rut to the mortgage belt.

We love our children for life and want to be there to help, but remember the golden rule, “When it comes to your hard-earned money, treat your adult children like adults and not like kids”. They will respect you for it and instil in them a sense of discipline and responsibility. And there’s nothing wrong with that.

At Blueprint Wealth, we offer financial advice that is right for you, no matter what stage of life you are at. Contact us to set up a plan that is right for you.

*Greg Major is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.  Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.