As parents we worry about our children whether they’re 4 or 40 and that includes our children’s financial well-being. Because of that we don’t always know when and how to help or deciding if ‘tough love’ is the best option. Money is a delicate subject and it’s often difficult to ask for advice so here are a few ideas that may help you help your kids.
How long should I help my children financially?
You should start cutting the financial cord as early as possible. Entitlement is especially prevalent in kids today who did not earn their own way and have no idea what items cost. As parents, we owe our children food, clothing, health care and shelter and we want to be the kind of parents who can give our children what we didn’t have growing up. Truthfully what we do not owe our kids is fun with friends, designer clothing, cellphones with data plans, a car or a party-school college experience. If kids want those things, they need to earn it for themselves. Otherwise, they feel entitled instead of having an attitude of gratitude.
Should I cosign a loan for them?
Lenders have reliable systems for judging how likely a person is to repay a loan. If the lender says your child isn’t ready to take out a loan, they might have a point. Whether your child has poor credit or no credit, both are signs of a lack of experience responsibly borrowing money. If the lender believes the risk is too great, you should carefully consider whether this is a risk you should bear because you will be held financially responsible for the loan if your child fails to pay. However, the drawback to not cosigning a loan for your kids is that it will take longer for them to start building their own credit.
What if they’re being financially irresponsible?
If your kids dig a financial hole for themselves, counsel them, encourage them, and help them find resources, but think twice about writing a check to have the hole filled for them. There is much value in having to think and work your way out of a problem you created. If you bail out our adult kids, there is a greater likelihood that they won't invest the mental energy to truly solve the root of their financial dilemma. The lesson will be unlearned and the problem repeated, possibly costing even more next time.
How do I know where to draw the line?
Consider the circumstances. Is your child going through a particularly challenging period? If so, lending a hand may be justified. But what if your child can’t manage money, overspends on “wants” or has other issues that lead to chronic money problems? Rather than giving cash to your child, consider paying a bill directly, buying him or her a gift card for groceries, or making an appointment with a financial advisor or counselor to help your child get on track financially. Don’t be afraid to say “no.” Your financial stability is just as important as your child’s. The only difference is that you’ll have less time to make up for any hit to your savings that may come if you put your child’s needs ahead of your own.