By: Leslie C. Quick III
I was talking to a friend last week, and he told me about his daughter who is in her twenties and pursuing a career as an investigative journalist. The entry level salary she expects to earn would prohibit her from living in a doorman building in her city and he was concerned about her safety. He told me that he was considering supporting her, and that it was worth it to him to have her in a safe environment, at least until she progresses financially to a point where she can support herself.
Our conversation got me thinking about my own four children, and how parents in situations like this often feel conflicted. On the one hand, they feel like if they can help their adult children, they should. But on the other hand, they know the financial cord has to be cut eventually. How can parents know when it’s time to lend a helping hand – or to let their kids sink or swim on their own?
Open the Lines of Communication
So, what are some solutions that will meet your grown kids’ immediate financial needs while also preparing them to support themselves financially?
It starts with open communication between parents and their kids — preferably long before the offspring leave the nest. As kids start thinking about their future career and education paths in high school, parents should offer clear guidance in terms of what they can expect earnings-wise with certain career options, as well as what their expected cost of living will be.
As a parent, you can play a critical role in helping your child understand what the real-life implications of their chosen career path will be. For example, let’s say that junior feels strongly about social justice and wants to get a degree in social work. Look up the average starting salary for social workers in your chosen city and work with your child to create a mock-budget. Remember, your child likely has little-to-no experience paying income taxes, rent, utilities, or purchasing their own groceries.
Creating the mock budget can help your child to see just how expensive it is to support themselves on their own, and how much they would need to earn to meet their expenses. The point of this exercise is not to force your child to choose one career path over another. Rather the goal is to help your child understand what the cost of living is in your city, and what salary would be required to support the lifestyle that your child desires.
Questions to Ask
Deciding whether or not to provide financial support for your children is not a blanket decision. Parents know their children, what their work ethic is like, and if they are savers vs. spenders. But generally speaking, my view is that if your child has a strong work ethic, supporting them financially for a period of time won’t dampen that ethic. I would add that my preference is to provide support that declines over time as your child progresses in their career and can live more independently.
If you are considering providing an adult child with financial support, the main questions to ask yourself are:
• Should you provide support and if so, how much? The best way to answer this question is to work together to create a budget. A typical budget lists all income on one side of the ledger and all expenses on the other side. Subtracting expenses from income will reveal whether the adult child is earning enough money to support himself or herself.
If not, look for ways to decrease expenses, especially discretionary expenses like entertainment and eating out. If cutting these to the bone still doesn’t bring the budget into balance, more drastic steps might be needed, like selling a vehicle or moving into a less-expensive apartment. If the budget still doesn’t balance after taking all these steps, you might want to consider providing enough financial support to make up the shortfall.
• What kind of conditions should be placed on the support, if any? It might not be unreasonable for parents to add some conditions to their financial support. For example, they might require their adult child to work a second job to help make up the budget shortfall. Or if they own a business, they might require the child to work a certain number of hours in the business each week to “earn” the support.
• For how long will the support last? Generally speaking, financial support for an adult child shouldn’t be open-ended. Parents should let children know that their support will continue for a set period of time, such as six months or one year. This will give the child time to increase earnings or boost savings so he or she can hopefully become self-sufficient when the time runs out.
If the deadline arrives and the child still needs financial support, a serious conversation may be needed about what he or she must do to support himself or herself. Parents might consider extending the support for another period of time, but only if there’s a solid plan in place for the child to become self-sufficient.
How A Financial Advisor Can Help
Sometimes kids have a hard time taking the advice of their parents, even when it’s good advice! This is where we can step in. We have financial advisors and team members in their 20s and 30s who can connect with your child as a peer and help them create a budget to understand their living expenses. With insight from the parents, we are well positioned to work with adult children to help them get to a good outcome.
Additionally, we have worked with many career coaches over the years and can make a recommendation for your child if needed. Oftentimes, well-meaning kids ask for financial support because they are struggling to find a career path that is right for them. The right career coach will work with them to assess their personality, strengths and weaknesses, education, and skillset to help them gain clarity and set career goals.
If you have more questions about supporting an adult child financially, please give us a call. A Simon Quick advisor can help you answer these questions and come up with the right plan for your family. To learn more, call us at (973) 525-1000 or send an email to firstname.lastname@example.org.Contact Us
About Leslie C. Quick III
Mr. Quick founded Simon Quick in 2004. He began his career in 1975 as the fourth employee of Quick and Reilly Inc., the first New York Stock Exchange (NYSE) member to offer discount stock brokerage to the investing public. During his 28 years with the firm, he served in many capacities. He was a key member of the management team that built the branch network, started and grew a major clearing firm, acquired and ran a major NASDAQ market making firm, made many acquisitions of NYSE specialist firms and built one of the industry’s first electronic internet trading platforms. Mr. Quick earned a BBA in Finance from St. Bonaventure University, which awarded him an honorary doctorate degree. He is a recipient of the Ellis Island Medal of Honor and the Flame of Charity's Man of the Year award. To learn more about Leslie visit his LinkedIn.
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