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Your Finance: Helping grown children versus enabling

Most people -- almost 60 percent -- help

Most people -- almost 60 percent -- help their children financially, even after the kids are done with school, according to a 2011 study from the National Endowment for Financial Education. Credit: iStock

Bill Cosby, speaking as the obstetrician Heathcliff Huxtable on his 1980s eponymous television show, once told his sitcom child: "Your mother and I are rich. You have nothing."

Judging from comments made by financial advisers and their clients, a lot of people probably wish they could say that, especially to their adult children.

Most people -- almost 60 percent -- do help them, even after the kids are done with school, according to a 2011 study from the National Endowment for Financial Education. Many do so at the expense of their own retirement security, according to November 2013 findings from Merrill Lynch.

That's an obvious no-no: It doesn't make sense to leave yourself vulnerable in old age to support your grown child. But once you go beyond that point, it's hard to know where and how to draw the line on helping your kids.

The key to helping your kids the right amount and doing it the right way is in communicating carefully. Figure out what you can reasonably afford to contribute and what your philosophy of child-helping is. Explain the feelings behind it.

Here are some other ways to optimize those gifts.

Don't enable dependence: Assisting with medical bills or pitching in during a time of unemployment is one thing. But supporting a level of spending your children can't pay for themselves is enabling.

Housing: Parents who want to assist their children with shelter should be careful. A move up to a home they can't afford to keep up is a recipe for disaster. If your kids want to buy a house they can afford to keep up, then down payment aid is a sensible way to help.

Buying a house with them or giving them your old house is fraught with tax consequences and other complications.

Incentives: If you want to encourage your kids to save, pretend you are running a family 401(k) and set up a plan for matching the savings that your kids do. Or you can pay for training courses or help with graduate school or child care, so they can build careers in a tough economy.

Just say no: If you can't afford to help, don't. Instead offer nonfinancial aid: baby-sit, help with home repairs or cooking, so they can work, teach them how to do their own home repairs or cooking. That's support, and a good way to transfer skills from one generation to the next.


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