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| Capitalstars Investment Advisor |
In an age where money defines the contours of most relationships, the parent-child bond continues to retain a degree of sanctity. Sustained by love and spurred by instinct, this bond is nurtured by parents, who devote themselves to protect and provide for their child. Showering the progeny with material comfort and monetary security becomes their raison d’etre, sometimes to the detriment of their own financial well-being.
The single-minded focus to secure the child’s future means that the funds for their own retirement go towards the kid’s foreign education; the medical buffer to be used in old age is depleted by a destination wedding. Sometimes the financial support continues well into adulthood, with a comfortable retired life put on hold to fund the adult child’s startup, or travel plans shelved to help him buy a house. In fact, a 2018 American survey by Merrill Lynch and Age Wave revealed that parents spent twice as much on adult kids as they did on their own retirement. In India, the figures are likely to be much higher. “It is important for parents to realize that they should live their lives on their own terms, not driven by kids’ needs,” says Mrin Agarwal, Founder Director, Finsafe.
Somewhere during the child’s physical progression from toddler to teenager and adulthood, the emotional weft starts to wear thin due to the increase in financial strain. The financial instruments intended to bind the child to parent serve to sever the ties. It could be a joint loan taken by the parent and child that the latter refuses to repay, or the financial dependence of a divorced child, or the increased medical expenses of a parent being borne by the child.
These and many other fissures in the parent-child relationship have their roots not only in the financial upbringing of the child but also in the parents’ monetary habits. If you haven’t taught the child how to manage money in his formative years, or have failed to make him financially independent as an adult, or even been careless with your own money habits, it will have a bearing on the ties between you and your child.
we will help you identify some of these financial stress points in your relationship with adult children, and tell you how to handle these.
SHOULD YOU OFFER FINANCIAL HELP TO ADULT KIDS?
Don’t, if the pestering is on a regular basis and depletes your retirement funds.
If you act as a financial crutch for your adult child, you could jeopardize your own goals, but what about situations where the child genuinely requires help? “Remember, that as you approach retirement, you can’t take a loan. So protect yourself before helping the adult child,” says Priya Sunder, Director, PeakAlpha Investments. Here’s how to decide whether you should offer help to your adult child.
SHOULD YOU BUY A HOUSE JOINTLY WITH CHILDREN?
No, it will create problems for both you and the kids.
“No, I’m not at all in favor of such an arrangement,” says Sunder emphatically. The reason is that it can create untenable situations and financial complications for both parents and adult children, leading to fissures and snapping of familial bonds.
SHOULD YOU PAY FOR THE CHILD’S WEDDING OR FOREIGN EDUCATION?
Fund it partially. Let kids shoulder the responsibility.
Till a few decades ago, this question would not have crossed an Indian parent’s mind. Of course, one paid for the child’s education and wedding, whatever it took. The only difference lay in the choice of institute or scale of the wedding. It was a subjective and personal choice depending on one’s financial ability. However, in the altered financial scape, where the parents’ pensions have dwindled and children’s earning capacities have gone up, the question doesn’t seem out of place.
SHOULD YOU DEPEND ON CHILDREN FOR YOUR MEDICAL NEEDS?
Ideally no, but being included in their employer’s cover is a good idea.
A few years before you are set to quit work, it’s a good idea to assess your health status and insurance needs. “Medical expenses comprise one of the biggest outflows for senior citizens and can be a gamechanger, impacting both the parents and their adult children,” says Sunder. So, it is important for parents to be financially prepared not only because of the surging health-care costs and steep annual medical inflation of 15-20%, but more importantly, to avoid being dependent on your adult children.
SHOULD YOU TAKE FINANCIAL HELP OR ALLOW KIDS TO HANDLE YOUR FINANCES?
Only if they have the expertise and your best interests at heart.
Financial dependence is never a good situation to be in, either for adult children or parents, but the risk of dependency is much higher for parents. There are two ways in which you, as parents, can become dependent on your adult kids. One, poor financial planning can leave you short of funds in retirement and you may have to ask for financial assistance from children in the form of a monthly contribution. Two, cannot handle your own investments or paperwork in old age, you may need to lean on your kids.
SHOULD YOU BUY PROPERTY AS A LEGACY FOR CHILDREN?
No, as it’s easier to pass on other assets without disputes.
For parents with money to spare, leaving a legacy in the form of property is a personal decision, but it may not be the most practical way to pass on your inheritance to the children. “Parents’ lives should not be driven by children’s needs. If this means not being able to leave behind property for kids, they should not feel guilty about it,” says Agarwal.
CAN YOU EVICT ADULT CHILDREN FROM YOUR HOUSE?
Yes, they can live in your house only at your mercy.
The cultural conditioning in India is such that adult children stay with their parents till they get married and even afterward. This arrangement is often fraught with tension and rifts can widen beyond repair when it comes to sharing finances or distribution of inheritance. What should parents do if the demands and pressure of children become overwhelming?