Mom Lend Me Some Money

Two years ago, when my husband loaned our son $300 to buy an Xbox, all I could do was sputter. If Carl had asked my opinion, I would have said no. Alex was a high school senior, and tuition was looming. Our son still hasnt paid back the entire loan, and my husband is so laid back that I dont know if he will ever require him to.

Thinking of Alexs future requests for a loan makes me chew my nails. What will we do if Alex asks for a loan to set him up in business? What if he asks to borrow the down payment for a house?

Should parents front money to an adult child this way? I remember the first rule of loaning money to a family member, which is Draw Up a Contract. Thats supposed to avert problems, but Ive heard of too many cases where it just doesnt succeed.

Im especially nervous because young people have such a sense of entitlement and dont seem to know the value of money. (Have you noticed how often they eat out?) I have a feeling many 30-somethings are no different than my 20-year-old.

Whether or not to lend money may be moot if you dont have it to lend, but that probably doesnt stop some parents. Theres always a line of credit, right? What if you do have the money? Whats the big deal, you might ask. After all, this is your child and you want the best for him or her. Is it a matter of what youre comfortable with? Shouldnt you be afraid your offspring will never learn responsibility if Mom and Dad are so generous?

To see what a professional advises, I asked Marcia Hill, a psychologist in Montpelier, Vermont, for her thoughts. If I had the money and my child were working hard and saving as best he could, I might lend it for part of a down payment on a house. It seems a reasonable thing to consider. My feeling would be not to lend money for a wedding. If he wants a party, he can fund it. With a child who has not taken responsibility for his own financial needs and choices, I would be unlikely to lend or give money at all. You are not doing your kid a favor by perpetuating his status as a dependent. On the other hand, with a child who clearly is taking responsibility for herself, you are far less likely to be in the situation of lending money. But if you are, it is more likely to be for good reasons and more likely to be repaid, she said.

Hill suggested asking yourself:1) Is the loan necessary? I would discourage loans or gifts of money when it is for a luxury (such as an Xbox), or if the adult child is able to get a bank loan with reasonable interest rates.2) Can you afford it? Don't help your kids at the expense of your retirement or your own needs.3) Is this a temporary or one-time situation (such as medical expenses or a down payment on a first home)? If an adult child is not taking responsibility for herself, then a loan is enabling, not helping. It only teaches the child to continue depending on Mommy and Daddy instead of being a grown-up.4) Should this be a loan or a gift? If it is not realistic to expect your child to repay the money, then don't set him up for failure and yourself for disappointment. And forget contracts. Will you really take your child to court to enforce a contract?Pat Olsen is a New Jersey based writer whose work has appeared in The New York Times and other publications.
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