Friday, August 6, 2010

Loans To Your Children - Great Idea?

Children dancing, International Peace Day 2009...Image via Wikipedia

Is it a good idea to loan money to your children? We all have crossed this bridge one way or another. One day your child comes to you with a need for money. Maybe they screwed up and need money for college. Something is broken in their car or house. Because they have never saved for a rainy day, they come to you. But maybe it's an emergency so great and unexpected no one has the resources like Mom and Dad. Your little child is hurting and you feel bad for them. You want to help them feel better. What do you do? 
A family I know had this same problem. There was a family with 3 children. All grown children living on their own. By coincidence all 3 lost there jobs at the same time. Mom lent her children money for a period of 6 months. She put on credit cards almost $55,000. Dad didn't even learn about this till in was all over. Mom reached a point where she couldn't even pay the minimums. One thing led to another, she couldn't pay her mortgage. The house is in foreclosure now. 
What went wrong here? Mom went nuts and helped the kids in the extreme. I'm sure she didn't mean for it to go that far. This has destroyed her future as well as the children's. Also Dad is going to suffer for his ignorance too. 
Maybe what should of happened is Mom and Dad should of sat down with everyone, plan something that would help the children without destroying the family. Maybe a plan of non-monetary help. It reminds me of the way you help someone who is drowning. A life guard is trained to approach a drowning person from the back. Many a time a drowning victim ends up drowning his rescuer in the panic of the moment. 
My own sob story pertains to my daughter. She got in a fix and couldn't pay for her last year of college, she needed a place to stay and car insurance. Also she had no job. What I did was let her stay with me. She got room and board. Car insurance with repairs and tuition/books. In a period of 18 months the total came to $8500. All on a credit card. Of course I justified it at the time as an emergency, it had to be done. I had to help my kid. Like the story above. I didn't really make the the right decision. It was agreed that she would pay it all back when she got her professional job. She finally got her good paying job. Let's see when I'll be paid back, I'm sure she will. 
The credit card payment isn't killing me and it won't. But it's a nuisance I want out of my life. I probably wouldn't do it again this way. But when your kid is in apparent trouble your brain turns to mush. I'm alot wiser now and alot broker. You also don't look at your kids the same way when they owe you money. You look at everything in their life when they spend money as a waste, that money could have been used to pay the debt. You don't look at your kids the same way. They can feel it and it hurts the relationship. 
I hate to reveal this but my parents helped me to the tune of $25,000. I was getting divorced, over a year I spent this much money on lawyers and expenses. If they didn't help me I would of been screwed. This is beginning to look like a trend. That was 14 years ago. They just gave it to me. Never asked for it back. Someday I will pay them back. 
Have we learned anything here. Human nature is strong. Parental love is strong. Don't lend money to your kids, just give it to them if you have it. And don't let them drown you. 


  1. Honestly, I do not think that lending money to your kids is a good idea. But there are many aspects, for example how old is a child and why do he/she needs money. The problem is that such a loan can easily become a gift. But as for me, if my child really needs help then I can not refuse. Maybe it's worth to try to loan money to your child just one more time to see if he or she is a responsible borrower. Lending can help you to learn more about your children and see if they need to get some financial lessons.

  2. I would like to see the statistics on how many children pay their parents back. I think the percentage is low.


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