Money Clinic: How do I stop being the family ATM?

My two children have finished their higher education and are now in their first jobs. Yet they still constantly ask for handouts to pay for flights home, bills, rent etc. How can I stop being the family ATM? WK, Dubai 

Expert 1: Tuan Phan, board member of the UAE Chapter of the Bogleheads group

WK, I feel for you, I really do. With the high costs of higher education and ever increasing house prices, I have seen many young adults moving back home to save money and/or making constant withdrawals from the bank of “mum and dad”. Rather than for necessity, the money is used to fund lifestyle choices - the latest mobile phone, new house furnishing and even for their dream holiday. This can go on for years, often with the children well into their 30s and even 40s.

There comes a time when the most important thing you can do as a parent is to step back from being one. It’s instinctive to want the best for your children and provide them with everything while protecting them from all the bad things in the world. However, there’s a fine line between helping and enabling and you have definitely crossed over into the latter. Counter intuitively, coddling them has the opposite intended effect, especially if they are now old enough to start their own families. Not only are the regular handouts not working but it’s starting to affect your own financial well-being and future retirement plans - both issues need attention immediately.

WK, your situation has a one-word solution: "No". Say it after me: "No". And one more time: "No". 

See how easy it becomes the more times you say it? This is what your adult children need to hear from you. Your ability to say that magical word will result in short-term pain but will turn them into financially strong, independent and responsible adults, in the long run.

Meanwhile, here is what I also recommend you do:

1. Agree with your partner that both of you will say “no” to all future financial requests (barring genuine emergencies). The plan will fail if either partner secretly provides financial help.

2. Direct them to sources of basic financial budgeting information online. There are also numerous free financial/budgeting apps, such as Mint, Wally and Personal Capital, available for their mobile (that you no doubt paid for) that will help them set up, monitor and keep their budget on track.

3. Sit down, go through their financial situation and help create their budget with them. Give them your personal tips to cut costs and what you did in the ‘good old days’ to make ends meet, when you were the same age as them.

As the ancient proverb goes, “teach them how to fish … and they will stop nagging you every time Apple/Samsung releases a new phone”.

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Expert 2: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life

Torn between giving your kids what they want and need and teaching values of independence, it's a very common dilemma in households, so you are not alone. However, it is a really important area to address.

Helping your children create healthy financial habits should start from a very early age as everyone's financial future can be determined by their upbringing. That's not to say if a family lives on the bread line, the child will do so as an adult, and if the family are rich, they will be rich - it could be quite the contrary. It's rather what relationship they created with money and what beliefs they built around it while growing up. And it's never too late to start.

First, how are your children's budgeting skills? Ask them to send you their budget sheet. Teach them how to think ahead and budget for upcoming bills and needs. Show them ways of cutting expenses and get them to build an emergency buffer in a separate account, while also showing them how to budget for that too.

It may take time so set boundaries and small milestone goals, so have a time frame and be prepared to continue being the family ATM for a period of time. Make a plan with them and get their commitment to work with you. So for example; tell them they have three months to get themselves financially organised. Also scale down the withdrawals by setting a limit to how much they can have each month. State the reason you will give them money, for example, you will not give them money for flights but you may give them money for rent.

Creating good financial habits affects your entire life with many falling into huge amounts of debt simply because of poor spending habits and lack of foresight. Showing your children how to be smart with money now will pay off for their future.

Next question:

Buying health insurance appears to be a minefield. I need a policy for my children but declaring pre-existing conditions whacks up the premium and the whole process takes a long time. What's the best way to find an affordable policy? RK, Dubai

Every two weeks The National features a reader's personal finance problem. If you have an issue or want to suggest a solution for another reader's concern, write to pf@thenational.ae