Put away the checkbook and hire an adviser

Question: As a parent, should I be helping out my daughter financially, and if so, how much? She is 42, never married and without children. She has a part-time job that pays $9 an hour. Though she once had about $60,000 in savings, she's spent it on her condo and education. She did not complete a degree. She wants a full-time job, but she has little tolerance for detailed work or high pressure. She sees a psychologist several times a month for depression. Her expenses are $1,500 a month - $650 for her condo and $500 for medical. We have been giving her $1,000 a month. We want to help her, not enable her. Thoughts?    - Concerned parents

Answer: Financial planners say parents routinely endanger their futures by being overly generous with their children. As they support children, parents save too little before retiring and spend too much of their savings early in retirement. When they realize they are running out of savings, it's often too late.


To make money last, financial planners use a rule of thumb: In your first year of retirement, spend only 4 percent of your savings and increase the amount you withdraw each year by inflation (3 percent). So if you have $500,000 in savings, you could use $20,000 the first year of retirement, $20,600 the second year, about $21,200 the third and so on. Test your spending with the T. Rowe Price retirement calculator.

Even if you have plenty of money, helping adult children might not be in their best interest because of the emotional effect on you and your child, said financial psychologist Brad Klontz, author of Mind Over Money.

"Financial handouts are rarely helpful in the long run," he said. "Money for nothing typically results in more of the same - nothing. It often delays an inevitable financial downfall, which is often necessary for someone to take control of their financial life.

"Even worse, it teaches a person that no matter what they do with their money, someone will always be there to rescue them or bail them out."

Specifically, Klontz notes that financially dependent people can have a "sense of helplessness." The money "stifles motivation to change, passion to better their life, creativity and desire to achieve," he said.

Money is such a powerful reinforcer, research shows, that when people receive money for chronic pain, it increases their reported experience of pain. Yet, research also indicates that people are happier at work than doing nothing, which worsens symptoms of depression and anxiety.

Handouts also "can lead to resentment on the part of the givers," Klontz said.

It is natural for parents to want to help, often out of a sense of guilt to make up for perceived failures. Klontz said most parents could point to things they wished they had or had not done with their children, so there is an inclination to be "financial enablers."

But your daughter is likely to outlive you and will probably not be equipped to handle money unless she learns.

Klontz said your money might be well-spent on a financial planner, who would train your daughter in budgeting, saving, and handling debt. Contact the Garrett Planning Network and ask for a certified financial planner who works for an hourly fee without selling products, or find a financial-education class through your United Way, university extension service, school district community education program, church or National Foundation for Credit Counseling (nfcc.org).

Rather than just cutting your daughter off, Klontz suggests telling her that you do not think the monthly payments are working for her and saying you will stop them by a deadline, perhaps six months.


Gail MarksJarvis is a personal finance columnist for the Chicago Tribune. E-mail her at gmarksjarvis@tribune.com.