Should you stop paying for your adult child?

It’s not uncommon for young adults to live with their parents after graduating from high school. This may only be for a short period while they try to find their feet – but what if it lasts a lot longer?

We find out how you can encourage your child, or children, to become financially independent, and we consider how you can prepare them early on.

Tip: Show your children how to solve their debt problems – get a consolidation loan.

Should you enforce independence at a certain age?

Giles Maynard, wealth manager at Carrick Wealth, says that once your child turns 18 you are no longer legally obligated to support them financially.

“However, all families are different," Maynard says. "With the rising cost of living these days, it has become more common for parents to continue to help their kids financially after they turn 18.” 

During the third quarter of 2021, according to Statistics South Africa, the SA unemployment rate reached 34.9%. At the same time, the petrol price has soared, which has increased the overall cost of living. This means that the current economic climate is challenging – especially for entry-level employees.

“The majority of parents will help their children when they cannot pay their own bills. However, it's important to set boundaries, especially if your child is capable of finding employment and earning a decent salary,” says Maynard.

For example, if your child has graduated from Varsity College as a developer, but they spend their days socialising rather than looking for work, you need to make it clear that you will not continue to support them unless they make an active effort to become financially independent.

On the other hand, if they spend hours applying for jobs, adjusting their resume, and calling prospective employers, you should be more patient with their progress. It can take time to find a junior role, and they may first have to work in an unpaid internship to qualify.

What if your child is still young?

Maynard says that parents should take the necessary steps to mitigate the chance of their adult kids becoming a financial burden on them. He recommends preparing them for financial independence in the following ways:

• Teach them from a young age. Involve your child in small money matters. When you’re faced with a financial decision that’s not too complicated, include them in your thought process. For example, you can explain to them that you’re trying to decide whether you should buy the “no-name” brand chocolate or the Nestle chocolate. Together, you can weigh up the pros and cons, allowing them to understand concepts such as in-store pricing.
• Cultivate the value of hard work. Good money habits start with good values. Your child won’t be able to support themselves if they can’t push through a difficult workday. Give them chores at home and treat them (albeit delicately!) like employees. Alternatively, you can encourage them to start their own business or, if they’re old enough, to find a suitable part-time job.
• How to invest and save. You can’t stash away money without some careful planning. To teach your child about saving, you can sit down with them and help them to create their own budget. When they are older, you can teach them about investments by having them create a mock investment account on an app, such as EasyEquities, so that they can understand how the stock market works.
• Setting financial goals. Besides having a budget, your children should also set some financial goals. Explain to them some of your own goals, and ask them what they would like to aim for in their own lives. This will give them a chance to think independently about their financial future and strive toward something important to them.
• Understanding debt and credit. Explain the distinction between good and bad debt, and make sure your children understand how their debt habits influence their credit score which, in turn, impacts their creditworthiness. Once they turn 16, you can add them as an additional cardholder on your credit card account, which will allow them to practice working with credit.
• Getting a grip on taxes. Some parents joke about withdrawing a large sum from their children’s pocket money to teach them about the reality of taxes. However, doing this in moderation could, in fact, do just that. Choose a modest rate, such as 5%, and explain that this will be their chore “tax” rate. You can then secretly save it for them and surprise them with it at the end of the year as a “tax return”.

“It's crucial to include your kids in conversations about money from a young age. Talk them through household bills and school fees, and allow them to help with the budgeting. You could also let them sit in on meetings with your financial adviser – even if they don't understand everything,” says Maynard.

Make sure that you in turn won’t become a burden on your children – start your retirement fund.