How to Avoid Creating a “Trust Fund Baby”

Did you know that a recent study by Merryl Lynch and Age Wave found that parents contribute a combined $500 billion to their grown children? That’s a great deal more than people are putting away for retirement.

While at first, this might sound noble and like a sacrificial display of love, financial planners and psychologists are concerned. They aren’t as convinced that this behavior is beneficial for adult children in the long run.

It’s only natural to want to take care of those you love, especially your children. So, if you see them in financial need, your knee jerk reaction may be to hand them a wad of cash. But what if that wasn’t what they needed? What if your adult children needed to learn how to buckle down and work hard? Or to cut out coffee shops and kombucha?

Certainly, there will be moments in life, like weddings or health crises, when it is appropriate to help your children financially. However, if your finances are interconnected with your adult children in significant ways for an extended period of time, then it can produce some serious problems.

If you do remain connected, you risk creating a trust fund baby, with or without an actual trust fund. A trust fund baby is an adult child who is unaware of the financial realities of life and unequipped to be responsible for themselves because someone else’s money has always been there to protect them.

This message can feel particularly hard for Christians parents to hear. You may be reading this and think, “not helping my kid is selfish” and “Jesus called me to be generous and sacrificial with my finances.” While Jesus does call Christians to be generous, he also calls for there to be boundaries between parents and children. So, you need to consider how you are interacting with your adult children and your finances.

Two Dangers Caused by Giving Adult Children Money

The two most common issues that arise from a lack of boundaries between your children and your finances are stunted growth and your own financial ruin.

James J. Ciprich, a certified financial planner with RegentAtlantic, said this about parents connected to their children financially, “I have found in my practice that parents have been somewhat to blame in enabling adult children to remain financially dependent.” Often, this enabling comes at the cost of your own savings. Many parents in the above reported survey admitted to being willing to support their children financially at their own financial loss.

While this might sound selfish to consider your own finances instead of your children, it’s important to keep in mind what the money is going toward. The $500 billion doesn’t just cover emergencies or big life moments like weddings, it also covers little things like phone bills, vacations, and even additional funds to get a nicer car. Is it your responsibility to make sure that your child gets their dream car, the newest iPhone, or an exotic vacation, not necessarily?

Maybe this was your role at an earlier stage of life, but now they are adults and responsible for their own finances. As Surya Kolluri for Merryl Lynch points out, “We are going to be parents for life.” But he also notes that the role will change over time, “there is a life stage up until age 18, and then there is a life stage after age 18.” Putting yourself at financial risk to make sure your children have everything they want in life is not the role of a parent to adult children.

Second, other than your own financial risk, by creating a trust fund baby you risk stunting your child’s emotional and financial growth. Dr. Laura Dabney, a psychiatrist and relationship therapist, says, “I’ve had a few patients that have difficulty putting up financial boundaries with their children…This is usually caused by the parents having a difficult time letting go of their child. When we refuse to let go, we prevent our children from learning the skills needed to be successful in life. We are hurting, not helping.”

It might seem natural to financially help your children but doing so can actually stunt their development. The stress of life, work, and finances is part of maturing. Everyone goes through it eventually and by experiencing it, adult children learn how to be financially and emotionally responsible.

If you don’t let them learn these lessons by always making life easy, then the moment something difficult comes along that you can’t fix, they will likely crumble. Unless you have enough money to protect them from any hardship, then you are setting them up for failure.

Since there is no amount of money in the world to fully insulate someone from difficulty, let’s consider a few ways you can prevent your child from becoming a trust fund baby.

The Christian Guilt of Financial Separation

First, the easiest way to prevent this is to let your adult children become financially independent at an early age. This might look like supporting them through college and then separating financially. It might be hard to watch them struggle in the short term, but they will figure it out and thank you in the long run. So, the short answer is financially separation is the quickest and easiest way to prevent making a trust fund baby.

However, most people reading this article are probably dealing with the repercussions of trust fund baby and are past the preventative stage. As a Christian, you might feel guilty about trying to separate financially from your adult children, but you shouldn’t. Nowhere in Scripture are you called to financially support adult children.

In fact, adult relationships between parents and children aren’t often discussed in Scripture. The only true prescriptive command is for man to separate from his father and mother and cling to his wife. So, if anything, Scripture prescribes separation, which carries both emotional and financial implications.

Unfortunately, this theological truth won’t necessarily make the conversation with your child any easier. To assist you to navigate these tense discussions, it will be beneficial to work with a Christian counselor.

They will be able to help you cut through some of the latent interconnectedness between your child and yourself. It may not be easy to identify at first, but a counselor will be able to uncover the extent of your financial and emotional codependency. The following are key topics to discuss with your Christian counselor.

How to Financially Distinguish Yourself from Adult Children

Establish Needs Vs. Wants

Again, supporting your adult children is tricky because there are sometimes it is more appropriate to give money than others. For example, weddings or health crises are more appropriate times to assist your adult children. These scenarios are times when other people are contributing to them financially, so it only makes sense as their parents that you would contribute.

But, when it comes to lasting and regular support, you will need to define what are needs and wants. If they are in a tough spot and in need of cash, then you might agree to pay for part of their rent.

But supporting them financially doesn’t mean paying their whole rent for a palatial apartment. Paying for a grandiose apartment is a want, not a need. So, focus on what is necessary like rent and food, not vacations and new iPhones.

Draw Up a Clear Timeline

If your support is for an indefinite amount of time, then it can drag on longer than you are comfortable with. Maybe you were fine helping them through grad school but want them to take over now. The problem is they might still be okay with you footing the bill.

That’s why setting a clear timeline is key. This forces them to acknowledge that this isn’t going to go on forever and encourages them to begin thinking about how they are going to handle their finances on their own.

Explain That it Isn’t a Punishment

Since this is family, emotions will be wrapped up in all of this. When your trust fund baby hears you are going to draw financial boundaries, they might pitch a fit, or at least take it personally.

This is another reason to have a Christian counselor involved. They will be able to give you guidance both about financial boundaries and about emotional boundaries. And, if things go very poorly, they can even play a mediating role.

Support Them in Other Ways

Not paying their bills doesn’t mean you can’t support your adult children. You can still offer to take them out to dinner, get them epic Christmas gifts, or offer to help them move. There are limitless ways you can support your adult kids emotionally, physically, and spiritually.

In fact, money is often the least important contribution you can make. It might feel like you are doing them a huge favor giving them money, but sometimes they need your presence, advice, and encouragement more than they need a stack of cash.

Conclusion

Giving someone money can feel like the most loving thing to do, but in reality, it isn’t. Part of life is rolling with the punches, learning from your mistakes, and developing your own sense of financial responsibility. By always being there to pay for your child’s life, you are actually stunting their emotional and financial maturity.

You might not want to admit it, but your trust fund baby is your creation and your responsibility, and it’s high time you cut off “daddy’s credit card.” This process won’t be easy, but remember your adult children are not your financial responsibility.