What to do when your adult children keep borrowing money from you

Do you know any working professionals who are still financially dependent on their parents? Despite better education and social connections compared to the previous generation, young adults in their 20s and 30s are increasingly unable to sustain themselves.

If your grown-up children are still borrowing from you, it can be a burden – and not just in the short-term. It can also eat into your retirement savings. In such situations, here is what you should do:

Understand the situation

First, understand the circumstance. Is your child unable to meet their expenses? “There are two kinds of cases. In one situation, the child has a low income and is unable to make ends meet. In the second situation, the young adult is earning a reasonable sum of money to take care of their expenses. They may borrow money from their parents once in 3-6 months, whenever there is case of excessive spending,” said Suresh Sadagopan, a Mumbai-based financial planner.

In both cases, you will need to have a conversation with your child. “The parent will have to draw the limit. Parents will have to ask their children to take care of their needs for regular expenses,” said Sadagopan. If you are not comfortable talking about finances, you can involve your financial advisor or planner to do the talk, he said.

Repercussions of being financially dependent

If your child is not financially independent, it will not just hamper your child’s future growth but also your financial situation.

“If you don’t talk to them about savings, their wants will keep increasing with more spending and more borrowings. It is better to have the conversation in the beginning itself so they don’t go down that path,” said Sadagopan.

What is the right time to talk about money? “The right time to have a conversation with your child is as soon as you start giving them an allowance in school or college. The money conversation that you have with them when they are young will build the right habits and it will be ingrained right from childhood,” said Shyam Sunder, managing director, Peakalpha Investment Services Pvt Ltd. If you continue to encourage borrowings, it will deplete your retirement kitty and impact your long-term financial goals.

You can offer a helping hand, not money

Instead of providing them support financially, you can teach them the basics of finances.

“Parents should encourage their children to save. You can rely on some thumb rules of financial planning. For instance, you can teach your child the 20% thumb rule—first, set aside 20% of your income and then spend the rest of it. The 20% corpus can work for budgeting and as emergency fund,” said Sunder.

Next, you can help them with investments. Though you may be willing to take care of your child, it is important that they be able to take care of themselves on their own.

Give your children the right message

The message you need to give your children is this: If they are still unable to meet their own expenses, it is time for them to relook at their finances. They must be told that while it is okay to have aspirations, it cannot be done at the cost of your retirement kitty. They could begin by cutting corners to increase savings: reduce outside meals, avoid expensive concerts and ditch the Uber rides. Once they are out of the debt trap, they can start making smart investment choices and meet their financial goals.

If you are in your 20s and 30s and still borrowing money from your parents, it is time to relook at your finances. You must have aspirations but not at the cost of your parents’ retirement kitty.