I had a very wise mentor who taught Guidance Counseling classes when I was enrolled in graduate school. I remember she asked our class: Should parents treat their children equally? The ensuing discussion resulted in understanding the importance of accommodating our children’s individual differences as needs arise.
This approach is very necessary when it comes to sharing money with adult children and grandchildren. Responding to the circumstantial financial needs of your family members, while remembering their earning capacity (short- or long-term), can require Solomon-like wisdom.
Because divorce or separation can trigger emotionally charged money crises, the atmosphere when discussing the topic can also be emotionally charged. Money conversations in families are difficult to have, and we all know families who have unraveled over the subject. Having a well-though-out approach to what you can offer when your family legitimately needs the help will prepare you to make objective decisions when the time comes.
Before offering money, determine if the adult child is making sacrifices while adjusting to the new life circumstances.
How responsible is your adult child when it comes to money? What is his/her financial track record?
Will your financial contribution require you to forgo something for which you have been saving the money? (A new roof? A cruise? Optional surgery?)
If the separating adult child requires a loan until the divorce is finalized, how will you memorialize the terms of the loan? What is the length and interest rate of the loan? What are consequences for missed payments?
If you make a financial gift to your adult child, how do you specify it is a gift? Further, is it necessary to explain the gift to the recipient’s adult siblings?
How generous are you to the grandchildren when they are caught in family reorganization? How will your generosity be perceived by other grandchildren?
Are there strings attached to your financial support? Do you specify how the gift is to be spent? Do you expect extra access to your family? Do you expect your financial help entitles you to call the shots for the family? Do you expect to be able to control your grown children because you have given them financial support?
As an alternative to a monetary contribution, are you able to temporarily take on paying for some of the family’s expenses until the separation details are finalized? How would you memorialize this arrangement?
Do you have the monthly income to cover the expense or do you have to take money out of your retirement savings when offering financial assistance?
If asked, should you cosign for a home mortgage, home refinance or car loan for your adult child?
And finally, if giving your adult child money jeopardizes your own financial well-being, it is okay to say ‘no’ if you cannot be a cash machine.
This blog is a excerpt from the newly published book, I’m Still Your Grandma I’m Still Your Grandpa.