A financial coach is advising families that their children should start contributing to the household once they're earning money as it's revealed that many parents are still supporting their kids after they turn 18.
New research has found that about one million Kiwi parents are supporting their adult children. A survey of 1500 parents with children over 18 found that 44 percent of them paid for their kids' groceries, 31 percent let them live at home rent-free, and 26 percent paid for their electricity and phone bills. Some literally were the bank of mum and dad, with 19 percent helping their children with a deposit for a home of their own.
Liz Blake, a financial coach at Enable Me, said that parents need to consider if they are helping or hindering their children.
"The first thing you need to understand is will it be jeopardising your own financial security. So that's one question, you've got to get yourself sorted first," she told The Project on Monday.
"But you'd need to be confident that you weren't just encouraging them to overspend or live beyond their means."
One way to help your children without it becoming an issue is to write a contract that documents all expectations.
"Is it a loan, is it a gift, what are the terms, is interest being charged, when does the loan have to be repaid," Blake said.
"If it's for something really big like helping them into a property, that of course needs to be documented correctly."
But if you don't want your children eating up your money, Blake advises cutting them off slowly rather than doing it cold turkey.
"I probably wouldn't advise cold turkey, but it's definitely okay to cut them off in a managed way. It comes down to communication. Sit down and discuss the timeframe of when the support might end and how it will end," she said.
"But ultimately, as soon as they are earning money, I think children should be contributing something to the household."
Blake said you can train your children early so they don't end up needing their parents' money later on.
"The earlier you start to talk to them about money, the better, so you can get them to understand the value of money and that you're on a budget and that once they're earning their own money, they can save a little bit, spend a little bit, perhaps give a little bit."
Blake said she has helped out her three adult children from time to time, but they've always paid her back.
"I think that's another good rule. If you're helping your children temporarily if there's cash flow issues, then you agree how and in what timeframe it's going to be paid back, because it's allowing them to learn and be financially secure themselves."
Watch the video above.
