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Should you help your kids with money at your own expense?
The desire to help could do more harm than good
They grow up so fast and cost so very much.
They grow up so fast and cost so very much. (Thinkstock)

Grayson Bell knows he is fortunate: His parents paid for all four years of his college tuition.

"They kind of pushed aside their own financial well-being to put me through college," the 29-year-old in Raleigh, N.C., confesses. "In order to pay for me and my two siblings to go to school, they subsided their retirement savings for something like 12 years."

As Bell points out, his parents will never get those years of investment back — but many parents make the same decisions his did. According to a July study from lender Sallie Mae, 85 percent of parents "strongly believe that college is a smart investment in their student's future. And they're putting their money where their values are: The same survey found that the typical parents pay 27 percent of each student's total school costs from their income and savings.

It's estimated that it costs $241,000 to raise a child in the United States from birth to age 17, and the costs don't stop when they leave home — there's still college to attend, car insurance to pay, weddings to finance and home down payments to scrounge up. With the unemployment rate for 18- to 29-year-olds hovering at a discouraging 16 percent as of August, it's understandable that parents may want to pitch in.

But when your child looks to you for help, should you put his financial needs ahead of your own?

Why do we want to help so badly?

It's not unheard of for parents to find themselves in the position of sacrificing their own financial health to give more to their children. "If I do something detrimental to myself to help out my kids, whatever. I'll make it up with extra freelance work," says Linda Guthrie, a 59-year-old mom of two college students. "Our job is to help each other out."

This desire to give your children as much as possible is something Dr. Fran Walfish, a child and family psychologist and author of "The Self-Aware Parent: Resolving Conflict and Building a Better Bond With Your Child," sees often. She explains that the parent-child dynamic has changed even in the past generation or two. "I think parents are inclined to put their children first because they're so desperate today to have their kids like them; they cannot bear to have their children angry at them," she says of the helicopter-parent generation. "Some parents are just generally selfless, but we are living in the generation of entitlement. Grown young adults have an expectation that they deserve and should be given to, and think they have the ability to convince their parents to give in."

"Being a financial resource for your children is less critical than being an emotional resource."

For her part, Guthrie understands that wanting to help her kids financially and being able to aren't the same. With money for school secured through student loans, both of her children work and are expected to pay what they can for non-essential expenses such as a new smartphone or a summer abroad — so Guthrie now plans to turn her attention to her own needs. "Now that my kids are off in college," she says, "I need to buy a new car and figure out how to contribute to retirement and build up an emergency fund. When my future is set, I will help them out."

Will giving less hurt your kids?

While Grayson Bell's parents funded his higher education, he doesn't intend to do the same for his 8-month-old son. He opened a 529 savings account before the baby was born, but if Bell has his way, the child will never know the savings exist. "I want to teach him to be self-sufficient at an early age," Bell says. "I want him to work hard. If he doesn't know about the savings account, he can't use it as a backup plan."

Bell credits this plan to the lessons he learned when his parents scaled back their contributions after his sophomore year of college. "They realized that I wasn't taking school seriously," Bell remembers. "But once I started working to cover my rent and food costs, I realized I hadn't been doing myself any favors. I learned a lot more in the last two years, juggling work and school and extracurriculars, than I did taking a free ride in the beginning."

Bell's experience isn't uncommon. When Laura Hamilton, assistant professor of sociology at the University of California, Merced, spent a year living in a dorm at a large, Midwestern university to write her thesis on how parental investments in college affect the students, she found that those who were most successful at school were also the most financially invested. That is, kids whose parents footed the bill without reservation were less understanding of the value of their education … and therefore less invested in getting its full value. (To learn more about her findings, read our interview with Hamilton.)

Just as Hamilton found that kids with less financial help cared more about college, Dr. Walfish finds that kids whose parents can't or won't help them beyond a certain point take more responsibility for themselves. "I think that kids whose parents can't afford to help them turn out O.K.," she muses. "Those kids are forced to tap into their own resources — not just financial, but also emotional — to find ways of generating their own income. In the end it's better for them."

Where should you draw the line?

Natalie Taylor, CFP® with LearnVest Planning Services, says that while every generation tends to want to provide more than they had, the changing economy means that today's parents need to think differently about financing their futures.

"With something like retirement, there's kind of a 'We'll figure it out later' mentality because we don't want the kids to deal with the consequences of not getting that money today," Taylor explains. "But if you don't plan for your retirement, your kids are going to have to deal with the consequences later. By giving large sums of money to your kids, you might be sacrificing your ability to be secure in retirement."

Putting your children's needs ahead of your own doesn't always mean funding their college tuition at the expense of your own retirement; Taylor also sees parents make compromising decisions like co-signing a child's mortgage … and then watching their credit score drop as the child becomes delinquent on payments.

Taylor says that if you don't have the three following pillars of financial health in place, you might need to consider scaling back the funds you give your children:

If you're concerned about putting yourself first financially, Dr. Walfish points out that being a financial resource for your children is less critical than being an emotional resource. "Parents need to feel good about whatever they can give and not feel guilty about the limitations of what they cannot," she says. "What they can always be generous with is their loving support and positive cheerleading. They can always be there to say, 'Yes, you're doing it on your own!' That's a great feeling for a kid — I think it means more than having the cash."

To pull back on your contributions, she recommends simply being honest with your children. "Tell them, 'I truly wish I could give you this money, but I have to earmark it in case something comes up. I'd rather you learn to be independent and financially autonomous now while I'm well and can enjoy watching you grow than spring a surprise burden on you later.'" She says that the main message, however you choose to convey it, should always be that giving them less money isn't a punishment — it's an opportunity for your children to grow.

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