Helping Adult Children Manage Finances Blog - BF

Helping Adult Children Manage Finances

About four years ago our youngest son got into a bit of financial trouble.  He had lost his job and ran up a lot of debt. Our immediate reaction was let’s go get him and help him out.  We did not want to be parents enabling grown children but we did not want to see him homeless. We felt that helping adult children manage finances was part of our parenting responsibility.

Helping Adult Children Manage Finances

Before moving into our future retirement home.  We set down with our adult child to review money management. He had recently finished school and was hired by a great company to begin his career.  I taught him how to set up a budget and to begin saving his emergency fund. At the time his savings was based on 3 months of living expenses.  I checked on him regularly to make sure he was on target to reach his financial goals. This was the beginning of teaching financial literacy.  You can learn more by reading  Financial Literacy for Beginners – 5 Basic Components. By the time we were ready for our move to the south, we began to look for affordable apartments that would work within his budget.

We Are Off And Our Adult Child Is Off To Manage His Finances

There were going to be a lot of things for him to do alone now.  Since he was unwilling to move with us he was now officially adulting.  So here he was with his first job, the first apartment, and loneliness was about to set in.  In addition, he would be managing his independence without the benefit of attending away college.  He went to school locally to save funds and keep student loans affordable. He needed to learn to manage his independence and the transition of living alone.  We thought helping adult children manage finances was the least of our worries.  Therefore, it was somewhat of a surprise when we started to feel like he was in trouble.

As confident parents, we thought we had prepared him well.  He was about to be the boss of his time and finances for the first time and he was ready. He would need to just manage his finances as he was taught.  However, he did not. He applied for some credit cards which lead to uncontrolled spending in a very short period of time. I believe there was a bit of comfort spending and some freedom spending.  He began to use credit to finance vacations and some fun spending.   In any case, the loneliness, freedom, and the new credit cards (which we knew nothing about) were the recipe for disaster.

What About Your Retirement Plans – What Extra Money?

We began to realize something was amiss when he started to be late sending the money for his portion of the cellphone bill and not paying his portion of the student loan.  We called trying to find out what was wrong.  He simply stated he forgot and then would send the money.  We soon came to realize that our son spends all his money having fun. He was sharing about the lavish trips he had taken which we assumed he had saved for. However, there was more he wasn’t telling us.

Finally, it let us know he had lost his job and would not be able to afford his apartment.  We are close to retirement and did not have funds to support two households. We can’t pay your rent and our mortgage too and continue to fast-track our retirement savings! So, we went to get him to start the road to resetting his personal finances.  We put our baby in a financial incubator where we provided shelter, food and, utilities. He would have to provide for transportation and pay down his debt.

Helping Adult Children Manage Finances Again

We have tons of love, support, advice, and a good listening ear. However, we had to convince him that he was not a failure and that there was plenty of time to get back on track.  Time to start a get-out-of-debt budget.  I suggested the Everydollar.com (Free) app to my son to get him started.

We then developed an action plan to budget his way out of debt

1. Created a get out of debt budget

2. Sold anything of value for cash

3. Contacted his creditors to negotiate favorable terms for paying off his debt

4. Applied for unemployment while looking for a new job

5. Committed to his plan

6. Once the debt is paid off start an emergency fund

7. Start new life debt-free

To learn more about setting up a budget read Setting Up A Budget For Beginners

Learning The Value Of An Emergency Fund In Managing Finances

One great thing that came out of this was a true appreciation for an emergency fund.  One never knows when they will lose a job, or need to repair a car, etc.  Also, he learned the value of saving for the things he wanted rather than racking up tons of debt.  It took him almost two years to pay off his debt before he could build up his savings.  Having to go through this entire process, was the best lesson he could have ever learned.

Also, understand no matter how bad it seems there is always a way out.  I am just happy that we were able to provide our son with this reset with managing his finances.  It is a blessing to be able to help our adult child manage his finances. We had to reteach financial literacy but we believe he got it this time.  Hence, it is easy to get into debt but way tougher to get out of it.  This was a textbook version of the credit card trap.

Learning How To Navigate The Credit Card Trap

Like all of us, the lore of buy now and pay later will always catch up with us.  The idea of being able to buy whatever you want whenever you want is a strong aphrodisiac.  It makes you appear in control, that is until the bills start rolling in.  However, you are still in denial because you can “afford” the minimum payment.  That in itself is the ultimate trap.  I can afford to pay $30.00 a month for the rest of my life. 

Who wants to be in debt until you die.  However, what do you do when the minimum creeps up to $200 a month or you have multiple credit cards and loans with minimum payments of $30 or more each? When this became too much for my son to handle we realized he could not manage his finances. He needed help but was unsure how to ask for it.

Should You Really Be Helping Your Adult Children Financially

If you can help your adult children then you should.  Teaching them how to ask for help in the right way requires them understanding how and why before the rescue.  However, we had to accept the fact that our son can’t manage his own money at this time.  We choose to help him because we felt that he simply got off track for a bit.  Also, we were in the financial position to help in the only way we could.  Bring him home and tackle the debt, build up savings and then send him on his way.  Hopefully, much better off for his experience. My parents would have helped me in this same way.

Hence, some ground rules needed to be established.  He was not here on an extended vacation.  He was to live with us for a set amount of time to pay off debt.  Which means he had to find a job quickly and begin paying off his debt.  While he was doing this he would not be required to contribute to the household.  His sole purpose in living with us was to pay off his debt and save for an emergency fund again.

The Mental State Of Helping Adult Children Manage Finances

Entitled dependence syndrome or “Adult entitled dependence” (AED) is a phenomenon where adults remain dependent on their parents in exaggerated ways that hinder their development and normal functioning. The dependency of the adult child creates distress and negative dynamics between them and their parents. Read more about this syndrome from Psychology Today.

We quickly dispelled this notion of extended dependency.  We were here to help but if he was not willing to help himself he was free to go. He was not going to be allowed to become dependent.  Our job was to make him whole again so that he could function on his own. We were not here to enable him to be less than he was capable of.  He was going to have to adult up. This is our way of “how to stop enabling your grown children”.  It may not work for you.  However, only you know your children. We showed him how to work through it no matter how painful.  While loving and encouraging them along the way and celebrating every small win.

The Importance Of Getting Out Of Debt

Getting out of debt was a very huge confidence booster for our son. As he paid off each credit card he began to believe in the process.  As he negotiated with each creditor and began to see his balances disappear he became more positive and grateful for our help.  He was seeing the end of a very dark tunnel.  It took him one year and six months to pay off about $30,000 in debt. It was now time to save, build up credit and have a little fun within his budget.  He had learned the value of saving for the things he wanted. Without the help of his parents, this entire process would have taken much longer but can be done. Therefore, it would have taken him a lot longer to reach financial independence and get back on his feet.

Whole Again And Ready To Make The Move

After living with us for about 3 years, our son was ready to make that move to his own place but then the pandemic hit, and like all other Millennials that moved back home my son had to remain home.

In July [2020], 52% of young adults resided with one or both of their parents, up from 47% in February[2020], according to a new Pew Research Center

The good news he was able to save more money and purchase everything he would need to move with cash.  This was a painful lesson learned. However, one he will not so readily repeat.  This is why messing up financially might be good for your adult kids. If they learn a hard lesson where you do not entirely save them. They will no longer be an adult financially dependent on parents. In this case, helping adult children manage finances worked for our family.

Happy to report my son has recently moved out and is doing well. I am encouraged that he will not repeat his prior circumstance based on how he is currently valuing his savings.  Once you have amassed a small fortune you don’t ever want to be poor again. Nor do you want to readily part with it.

“There is treasure to be desired and oil in the dwelling of the wise; But a foolish man spendeth it up.” (Proverbs 21:20 KJV)

Ways to Help Adult Children Manage Finance and Save Money

1. Start a budget

2. Cut all unnecessary expenses i.e. subscriptions

3. Sell anything and everything you don’t need or want

4. Live below your means

5. Save for the things you want

6. Shop less and mainly for needs not wants

7. Use coupons and find discounts

8. Dine-in i.e. start cooking more at home. Have pot luck with friends.

9. Find fun activities that don’t cost money i.e. hang with friends and family at home

Here are additional resources:

Living Below Your Means

What is the purpose of a budget?

Being Financially Sound

I Can’t Afford to Move Out

Millennials and Debt

Mind Over Money Budget

Wealth Accumulation

Let’s Budget, Spend, and Live!

Sabrina

12 thoughts on “Helping Adult Children Manage Finances”

  1. My older two are on their own and managing. I’m sure its been a big adjustment for them, but I would not be willing to take them back in to support them financially. What you did is just right. Helping but not trying to save him.

  2. Teaching finances and how to plan and stay on a budget is so important. We try every chance we get to teach our boys the value of money. Our oldest will be graduating next year, and I doubt that we will be ready to manage his money. Thanks for the awareness. We need to sit with him and go ever a planned budget.

  3. This is great. There are so many young adults who don’t have the first clue about finances. Thankfully my parents are like you and sat me down and taught me about them. It’s a shame that these things aren’t taught in school!

  4. Very important reminder that managing finances is a lifetime commitment! I also think your point on helping your children manage to the point they are ok to do well on their own again is also very important. Great post!

  5. I love that you found a way to help your son without just bailing him out and paying for everything. My parents are very money smart. They knew to look for signs of me or my sister struggling in that area and be ready to go over a budget and help us get on track. I am very blessed to have them; I have several friends that did not have anyone like that in their lives.

  6. I love the EveryDollar app and use it probably every day as my transactions come through lol. Dave Ramsey saved us a few times lol. But it’s hard because my parents didn’t really teach me about money. It was one of those things I think a lot of parents expect their kids to just know how to do. But credit cards really changed that. And getting into debt is more possible now than ever. I’m hoping I can help my kids learn how to budget and live below their means in time for them to get to college, but I’m still figuring that out myself… so, here’s hoping!

  7. What wonderful lessons to teach your son! My kids are all doing well however the grandkids are getting old enough that this info will be helpful for them.

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