Why paying off your child’s college debt might be the worst thing you can do for him.
The best and shortest answer to the straight money question is none. That’s right, zero dollars. Why? Because your child is now fully armed with an education, is an adult, and needs to behave in a mature, responsible manner. If you step in and solve his financial problems for him, you will unintentionally teach him that he is not capable of solving his own problems. Even worse, he will make future decisions knowing that you are his safety net and will bail him out if he splurges, or decides that he would rather be unemployed than start out at the bottom of the corporate ladder.
I have seen many clients give money to adult children, whether they can afford it or not. For those that can’t, the emergency is more immediate. Stop subsidizing laziness and poor decisions or you will all be in the poor house. I was recently working with Jeff and Sara, parents of 25 year old Chris, who were having trouble living on their retirement income and were in danger of running out of money and having to go back to work. Chris was described to me as an intelligent adult who did not graduate from college, was not currently enrolled in courses, was working full-time, and was taking $1,500 per month from his parents to pay for his rent, cell phone bill, car payment, and auto insurance premium. When I asked Jeff and Sara why they were giving so much money for such basic expenses to an adult child with a full-time job, I was not prepared for their answer. They told me they were giving Chris money because “he couldn’t have any fun if they didn’t help him out with his bills”. So the retired parents aren’t making ends meet and the fully capable child is having a ton of fun instead of getting a second job to support himself. Jeff and Sara have been sending Chris money they can’t afford to give for over two years. I helped them to understand that nothing would change for Chris until they stopped sending him money.
For those with plenty of money, it’s more about legacy. You worked hard for your money but your child hasn’t. Getting it for free is akin to winning the lottery. There have been numerous studies, including one famous 1978 study published in the Journal of Personality and Social Psychology, that indicate that lottery winners score low on overall happiness and that sudden wealth acquisition was an overall negative. The key is to transfer wealth to those who can appreciate it and use it wisely.
The more complicated answer incorporates all that led up to the debt and issues that are not money related. Did you over-indulge him as a child? Are you afraid that if you don’t help him he’ll be mad at you? Will that mean that he won’t love you anymore? Do you feel that you fell short as a parent when he was growing up and are trying to make up for it now? Did you think you could spoil him as a child and he would be ready for adult responsibilities anyway?
If you have made mistakes, it’s never too late to step-up and teach your child the lessons that will better prepare him for the success that can only come from self-reliance. Begin by thinking through all your options and then asking yourself “what’s next”?
If you give him money, what’s next? Will he want more? If you agree to help, do so with boundaries. If you agree to help with half the payment each month and he doesn’t come up with his half, what do you do? If you make up his half “just this once”, you will teach him that he doesn’t have to keep his promises and that you’ll bail him out. Figure out ahead of time “what’s next” and build that into the agreement.
Entitlement is all about expectations and boundaries. An entitled child has unrealistically high expectations and has not been exposed to appropriate boundaries. With this internal map, he will struggle with relationships, his career, and have limited success. You can help undo the damage by not indulging his expectations and setting limits on what you are willing to do for him. Let him know that you think he’s very intelligent and capable and that he will figure out how to pay off his debt. Then be brave enough to stand back and let him do just that!