Questions to ask and guidelines to consider when assisting an adult child with finances

When your adult children or grandchildren are in financial need, it can be difficult to know when and how much to assist. It may feel uncomfortable or intimidating to start conversations; however, it is important to have open, ongoing and clear communication around finances. While every situation is different, here are several guidelines to consider, questions to ask and community resources to utilize before giving your adult children financial assistance.

Set the Tone for Productive Discussions

Talk about money openly and honestly, and be supportive as they face a financial challenge. Share how you have handled money in your own life. Let your adult children know that it’s normal to make mistakes or have setbacks. Share things that you wish you’d done differently, and remind them of times they’ve overcome adversity.

Questions to Ask Your Child

• Why do they need your assistance and for how long? Is your child in crisis, or are they overspending? Can they pick up an extra job to supplement their income/lifestyle? How much assistance do they need? Is this a short- or long-term need?
• Are they unable to open a bank account? It can be costly to manage money without one. If your child has been denied an account because they have overdrawn theirs in the past, they should request a ChexSystems report. (ChexSystems is a nationwide reporting agency that collects information on closed checking and savings accounts.) They may be able to clear up their report by repaying the overdrawn amount and/or fees on the accounts. It may be possible to open an account through a community organization (like FAIR) or with a second chance account. Before signing up, it’s important to review fees, find out clearing times for deposits and know how to access funds.  
• Are they able to access affordable credit? Urge your child to avoid payday loans at ALL costs. The interest rates on these loans and high payments are designed to keep borrowers in debt. If your child is using these loans, refer them to Exodus Lending, a resource that assists Minnesotans in getting out of the payday lending cycle.

Things for You to Consider

• How much can you reasonably and willingly help and for how long? If money is involved, start by reviewing your budget. Set expectations, limits and guidelines with your child up front, and check in with them along the way.
• Have them pay rent if they move back home. Your adult children should contribute to household expenses and chores. A monthly amount should be discussed and agreed upon prior to them moving in. If they’re in crisis or otherwise not able to afford rent, set a limit on how long you’re willing to assist.
• Don’t expect to be repaid if you give your child money. Unless you are having them sign a promissory note that guarantees you being repaid, consider the money a “gift/donation.” Or, as mentioned above, are there chores/tasks around the house they could help with as payment? If they do follow through and pay you back, that is a bonus!
• Think twice before co-signing a loan. Are you prepared to take on that car, boat or mortgage payment if your child is unable to pay it? Are you okay with your credit report having a late mark if they do not make the payment on time?  If the answer to these is no, then don’t sign on the dotted line. Instead of co-signing a loan for them, have your child set up an appointment with a certified financial counselor. The counselor can assist them in creating a plan to build or improve their credit score. That allows them to gain the independence they need to take out a loan on their own. If you do co-sign a loan, consider paying the loan yourself, and have them repay you to avoid any dings on your credit.

LSS Financial Counseling has certified, experienced financial counselors who can work with your loved one to improve their credit, create a workable budget, track expenses and manage debt. Our trusted, nonjudgmental support is available to you as well. Contact us at 888.577.2227, or get your support online.

The following individuals co-authored this article. All are Certified Financial Counselors with LSS Financial Counseling.