They say that this is an especially difficult generation for kids (meaning young adults) to get ahead…and then again, there are others who strongly disagree. Regardless of your stance, we are witnessing a trend towards clients wanting to financially help their adult children. Our clients, who themselves have built up a healthy-sized portfolio through their lifetime, often find themselves facing a dilemma of sorts when seeing the financial challenges their children face – whether that be trying to purchase their first home, starting a business, or other endeavours that require a serious injection of capital.
The question facing mom and dad today is at what point should they step in to offer help, if at all? On the one hand, they don’t want to hamstring their children or otherwise cause them to become dependent on hand-outs. After all, hard work and disappointment are a natural part of life and a value that many affluent investors wish to have instilled in their children. At the same time, parents do not like to see their children struggle, especially if they are in the fortunate position of being able to help out. Why not see the fruits of that giving at a time when it is needed most?
Firstly, let’s clarify that there are several ways that parents can help their adult children and that this is not a one size fits all solution. When we work with clients, our first aim is to ensure that there is agreement, chiefly within the couple, because obviously the extent of the help is up to them. Second, we need to realize that it is okay for gifts to come with strings attached. Parents are in the position of being able to prescribe certain conditions which need to be met. As an example, this could be in the form of giving a loan which traditionally the child might not have been qualified for, but which does still need to be repaid. Of course, with that, there also needs to be a plan of action for if things do not work out as intended. Lastly, it is entirely possible that your gift will not be received the way you expected it to be and one needs to be prepared for that potential outcome as well. Remember that the overarching goal is to be able to bless our children and what that looks like will vary greatly between families. So, make sure that your plan is as unique as your family.
Janet Kim Sing, Portfolio Manager
Capstone Private Wealth