Talking to grown up children about money

Conversations with our children about money don’t stop when they’re grown up. This guide tells you more about how to handle conversations if you want to ask them to become more financially independent from you and what to talk about if you want to ask your parents to be a guarantor for a loan.

Asking adult children to contribute to household expenses

The economy is tough on grown up children, but this doesn’t mean you have to write them a blank cheque. Lots of them are living at home for longer as the cost of living is rising and it takes longer to get onto the property ladder.

Parents have to try to balance wanting to soften their child’s entry into the big bad world full of financial responsibility, while making sure they are still financially secure themselves.

If you can no longer afford, or want to cover all the cost of washing, internet use, phone calls, insurance, food etc that your adult children are spending, you may have to offer up some tough love rather than hard cash. After all, if you make sure you’re financially secure you’re better placed to support yourself and your family for the long term.

Clear communication with your children is key. They may not even realise how much the financial support they receive from you is costing if you’ve never told them.

Be honest about the financial impact they make, create a plan to end the support or suggest a time frame for reducing it.

Encourage your child to complete a budget, so they are able to see what things cost, as well as organise their own finances.

Your love for your children, and theirs for you, isn’t linked with money. It might feel like indulging them is for the best - the best thing for them in the long term is letting them know their costs and giving them an opportunity to start standing on their own two feet.

The sooner young people learn to take responsibility for money and make their own spending and saving choices, and understand the full implications of living independently, the better they will be prepared for the realities of adult life.

If you feel daunted about starting the conversation, read our guide How to talk about money.

Elder financial abuse

Most children will be happy to pay towards household costs when asked to, and most parents will want to help their children when they can. However, sometimes adult children can try to control parents’ or older family members’ money.

This could be by demanding cash or running up debts in their name, often accompanied by threats of physical or emotional abuse if the person refuses to comply. When this happens, starting a money conversation could put someone at risk of emotional or physical harm. They may also feel isolated and fearful of speaking out about the abuse.

It’s important to know that financial abuse is a criminal offence and if you are experiencing it you don’t need to struggle alone. There is lots of help out there. If you want to know more about the signs of financial abuse and how to get support, read our guide Protecting yourself against financial abuse.

Asking your parents to be a guarantor

If you aren’t earning much or are finding it difficult to borrow money because you don’t have enough credit history, you may want to ask for help from your parents to get a loan, mortgage or sign a tenancy agreement.

One way to do this is to ask them to become a guarantor – a third-party person who provides financial assurance that loan repayments or the rent will be met by them if you are unable to pay.

If you get your guarantor to co-sign on the loan or tenancy agreement, they will be legally bound to the financial requirements just as you are.

This is why a guarantor is someone who would need to have a considerable amount of trust in you, and why often it’s parents who take on the burden.

When asking your parents to be your guarantor, be honest with them regardless of your history with money and loans. They’re probably familiar with your financial standing and spending habits, so there’s no point in beating around the bush.

What matters most is assuring them that you will be responsible and say up front if any financial issues come up. To give them confidence in you, it’s a good idea to:

  • Share with them your monthly budget so they can see how exactly you plan to pay your rent and other bills
  • Work with them to come up with a back-up plan together in case you fall behind on repayments and need to get back on track.
  • Make sure you have explored all other options before asking. Do you really need to borrow? Is it worth waiting until you can afford repayments yourself or you’ve built up a good credit score?

Make sure the guarantors get their own independent advice, only ask them to guarantee what they’re comfortable with and above all, make sure everybody understands what they’re getting themselves into.

Things you should make sure your parents are aware of, include:

  1. Do they completely understand their responsibilities as a guarantor?
  2. Do they understand the legal liabilities and what they mean if you were to default on the payment?
  3. Do they realise that the worse case scenario could mean them losing their home? Most parents think it would never happen to them, but it is actually quite common.
  4. Are they able to really able to afford to cover your debt?
  5. Do they feel pressured into being a guarantor? There’s usually a feeling of emotional obligation.

How to talk about money

If you need to talk to someone about money but aren’t sure how it will go, use our guide to help you get started, including tips on how to get a good outcome, share money goals and what to do if you think the conversation may be tricky or it doesn’t go as planned.

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