One of the age-old questions parents face is when do you stop financially supporting your child? What obligations do children have to support themselves financially? What various expenses should a child be responsible for vs a parent paying for? These are all issues that parents must work through to determine what level of financial support they will provide.
When kids are teenagers one of the most exciting things is getting a driver’s license and driving. Driving often comes with a desire to have their own vehicle. Parents need to determine if they will have children pay for their own vehicle or not. Most parents feel they should provide at least a little help to their children in the purchasing of a first vehicle, with only 12 percent indicating they should provide no help, according to recent research from Spectrem Group. That help is limited however as only 20 percent of investors feel they should provide extensive help. Nearly half of investors, 46 percent, feel that parents should provide some help to kids in purchasing their first vehicle. Automobile insurance is slightly different, with a third of investors feeling parents should provide some help to their children for automobile insurance. A quarter of investors feel they should not help their children at all with automobile insurance.
Housing costs are another expense parents need to determine if they will help children with before they are fully independent. Forty percent of wealthy investors feel they should provide little to no help to their children for housing costs, while 22 percent feel they should provide extensive help for housing costs. Some housing costs are likely to come after children are done with their formal education, however less than a third, 31 percent, feel that parents should help children even after their formal education is complete. What about the expense of that formal education? Forty-two percent of wealthy investors with children feel a college student should either finance most of their education or be responsible for paying back their student loans.
When do children have the obligation to be financially independent if it isn’t clear when the liabilities end? Do children have the obligation to become financially independent as they get older? Wealthy investors with children feel children have that obligation, with 95 percent agreeing with that statement. For those investors who anticipate having kids but haven’t yet they are far more lenient on becoming financially independent as only 61 percent feel that children have an obligation to become financially independent as they get older.
For those wealthy investors who feel that children have the obligation to become financially independent, 35 percent feel the time for financial independence is when the child has a full-time job. Twenty seven percent of wealthy investors indicate that financial independence needs to occur after the child completes college or technical education. The child being able to pay their own bills is the time that 21 percent of investors feel is when they need to be independent.
The one thing that is very clear from this research is that the attitudes of parents regarding what children should pay for and when they need to become financially independent varies. Investors need to determine what expenses they will cover for their children and establish when they feel their children should be financially independent. They may want to work with their financial professional in helping determine some of these parameters as they have the potential to have a financial impact on the parent’s financial plan.