Smart Ways to Financially Help Adult Children

Parents often find it distressing to see their adult children struggle with economic uncertainty, large debt loads and financial temptations. But giving financial support to an adult child or grandchild without careful thought and preparation may do more harm than good. To protect your relationship and help your loved one become more financially independent, consider taking the following steps.

Analyze the situation. When a child asks for financial support, consider whether the money will help him or her become more self-sufficient eventually, or only lead to more requests for help. For example, is the financial emergency a result of poor decisions and a lack of planning – behavior that will continue as long as you support it – or of outside factors, such as heavy student loan debt or a weak economy? It's also important to examine your own situation; will helping jeopardize your own financial future? Evaluate the emotional consequences, as well; for example, will aiding one child create conflict with another?

Create a winning situation for everyone involved. If your child is struggling to repay credit card debt or come up with a down payment, you may consider simply bailing him or her out. If so, it's important to stipulate that this will be a one-time-only deal, or the child may never learn to be financially responsible. Rather than offering a free ride, consider matching each dollar the child contributes, thereby encouraging strong financial habits.

Formulate a plan. To help prevent future problems, establish clear expectations. For example, before your child receives a loan or moves back in with you, determine a repayment schedule or move-out deadline. Then draw up a written contract.