Should Parents Help Adult Kids With Rent? 3 Pros and 2 Cons To Consider
Many parents often dread the day when they will be empty nesters, but given the current economic turbulence of today, that ennui has now turned into a financial goal. In fact, NBC News reported that for the first time, 50% of parents with a child over 18 provide at least some financial support and spend an average of $1,474 a month. Though the biggest category of that support is housing, many things get added to the tab.
There's no universal right answer here, but is this help what is best for everyone? Maybe, but maybe not. Former CEO and current Board Member and Shareholder of Madison Trust Company, Daniel Gleich, said, “Subsidizing housing for children is undoubtedly considered noble, and an understandable inclination as a parent. However, continuing to financially support adult children can potentially put a damper on the progress of your retirement savings.”
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So, if you're debating whether to help your adult kid with rent (or you're the adult kid wondering whether to accept it), here are three good reasons to do it -- and three reasons to think twice.
Pro No. 1: It Gives Them a Real Financial Head Start
Having the means to help and giving thoughtful financial support can give a young adult a strong financial foundation as long as it doesn’t create an unhealthy reliance. However, make sure to set a timeline, name a savings goal and write it down. Help that comes with a plan is a gift but help that comes without one could be a trap.
“Aiding adult children’s growth doesn’t necessarily have to be financial. Parents can consider offering help in daily tasks that may complicate an adult child’s ability to make money. For instance, if they have grandchildren, they can offer to provide transportation to school or take them to their recreational activities,” said Gleich.
Pro No. 2: It Can Strengthen the Relationship (With Boundaries)
Multigenerational used to be more the standard, but choosing where you live should be more than just a financial arrangement. With housing costs being what they are, for many families, living together helps adult children save while also allowing them assist aging parents. When expectations around timelines, savings goals and household responsibilities are clearly discussed upfront the arrangement can work well for everyone.
Pro No. 3: It Beats High-Interest Debt
Helping an adult child avoid high-interest debt in a genuine short-term crisis can be a great use of your resources, as long as you have them to spare. If the choice is between a parent helping with two months of rent or a kid racking up credit card debt at 25% interest, the math usually favors the parent stepping in.
“If your child is attempting to break into a new career path, consider covering supplemental education, certification or licensing costs, or interview travel,” said Gleich.
Con No. 1: Parents Are Sacrificing Their Own Retirement
This is the number most parents don't want to look at, to the extent that a majority of parents supporting adult children report stress about their ability to retire comfortably.
“Everyone will reach a point where they’re no longer able to work. Self-preservation is self-care, and a part of self-care that often gets neglected is retirement preparation. It’s considered best practice to not postpone retirement planning, regardless of potential concerns for loved ones,” said Gleich.
He added, “Saving for retirement already comes with relative challenges to overcome, such as market volatility, the risk of inflation, and having enough saved to sustain your retirement years. As an adult with adult children, you’re likely either in your peak earning stage or soon approaching the years in which you qualify for catch-up contributions. By delaying contributions to subsidize your children’s housing, you could miss out on years’ worth of exponential compounding.”
Con No. 2: There’s a Danger of Not Being Able To Cut Them Off
When financial arrangements drift with no end in sight or exit plan, it can grow resentment on both sides. But there are ways to edit how you help that work for everyone.
Gleich said, “To help children combat unexpected circumstances, a seemingly optimal approach may be to create a fiscal dynamic based around flexibility rather than total financial dependency. If children’s earnings are minimal, perhaps building a larger emergency fund or allowing them to temporarily move back home can help them get back on their feet and offer a solution where both sides are ostensibly able to benefit.
The last thing any family member wants is to be a burden, so talk it out.
“Another option to consider is covering one short-term expense, where a concrete end date is agreed upon. This allows you to help, without leaving your assistance open-ended,” said Gleich.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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