Should You Financially Help Adult Children?

As originally appeared in The Jerusalem Post on January 14, 2021.

Everybody knows how to raise children, except the people who have them. – P. J. O’Rourke

I recently had a Zoom meeting with a couple that received an inheritance. Aside from the usual questions that came up like their goals for the money and how much income they need to supplement their pensions, they asked how to balance financially helping out their adult children with teaching them financial responsibility and independence.

We spent a long time discussing the issue. Obviously, there are no empirical answers and each case needs to be dealt with on an individual basis. I mentioned that I recalled reading many years ago in a book about Warren Buffet that when one of his children got married and the new couple had no money, they asked Buffet for some money to buy a used couch, and he refused and gave them a loan instead. To me, that is very extreme and a little nuts as well.

As I mentioned last week, it’s birthday season in my family. I’ll take this time to wish my wife a happy birthday, as well as my father, who is turning a young 91 on Shabbat. They should both have a year filled with happiness and most important in our current time period, health. Speaking of my father, we grew up in a home that put a premium on becoming independent. I remember working at odd jobs and paper routes since I was 11 years old. If we wanted to buy something, we needed to buy it with our money. Certain things like education or other essentials were covered but if I wanted to buy a set of golf clubs, I was going to foot the bill. I won’t forget the time I was given money by my mother to go and buy milk, with the specific instruction to bring back all the change. Well, I brought back the change minus 25 cents for a pack of baseball cards. Believe me when I say I still feel the pain in my rear end to this day!

Certainly, by the time we became adults, we were expected to be financially independent. On the other side of the spectrum are parents who will keep on paying for their married children’s every expense. Whether it’s food, cellphone bills, or buying an apartment in full – no mortgage – for the child, they just can’t say no.

Much to my disappointment, the reason that many financial planners encourage parents to cut off financial support to children is because of the impact it will have on their own retirement. It’s like if that wasn’t an issue, then it would be okay to support them forever. It also flies in the face of our tradition. In discussing a father’s obligation to his son, the Talmud in tractate Kiddushin 29a says specifically that the father needs to teach him a profession. Nowadays, it seems as if the work ethic and the need to pay your own way are no longer values.

As I mentioned, I don’t think there is one correct method, but I do think there have to be limits. Too often I see parents continue to bail out their children who have made bad financial decisions. I really think that in such a case, while it may be very painful emotionally, you need to let your adult children make the mistakes and learn not to make the same mistake again.

For those supporting young recently married couples who may still be in school, certainly help is warranted, but I think there needs to be a limit. I receive many panicked calls from couples where the husband has been learning in kollel for a few years and they are getting cut off from any parental support. I don’t think surprising a couple that they will be cut off from support in two months is smart, but from the get-go, if it’s disclosed that parents will pay the rent for two years, for example, and then they are on their own, is a very reasonable approach.

I’m not blind to the fact that it’s not easy to make it financially in Israel, especially with large families, and in many cases, grandparents want to help pay for braces, or their grandchildren’s tefillin for their bar mitzvah. If they have the means to pay for such things, then go for it. That’s all about creating a close-knit family structure, which is obviously important.

As Dave Ramsey writes, “A good phrase to remember is “good fences make good neighbors.” We all need some fences around us to keep from wandering too far, giving us boundaries. We need to know our limits. It’s also good for our kids. And the same holds true for your money.”

I’d very much like to hear from you, as to your idea of what an appropriate level of help is and what would be considered too much support. Feel free to email me.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.