Should You Provide a Financial Bailout for Your Adult Children
Before you rush to fix your child’s problem, ask yourself whether you are truly helping him or her.
Grant and Melody (not their real names, but a real story), raised their son, Finn, in a traditional, faith-based home. When he graduated from college, Finn decided to join an online dating service to assist him in finding a wife. He didn’t know how to carefully ask questions of his future bride, and ended up in a very difficult marriage to Shannon.
Sometime within the first 18 months of their son’s marriage, Grant and Melody became concerned. The young couple said some things that indicated they were having financial struggles. Every six months they moved to a new apartment, but then suddenly bought a house, so Grant and Melody thought things had worked out. Strangely, though, Finn hadn’t consulted them, relying solely on input from his in-laws during their home purchase.
About a year later Finn and Shannon approached Grant and Melody needing money to make their mortgage payment. Wanting to help, Grant and Melody decided to lend the couple enough money to make the payment, and clearly communicated the repayment terms. They allowed Shannon to work off some of the debt by cleaning their home, deducting a fair wage each time she did. Shannon cleaned their home three times, and then decided that she’d rather not do the work.
Over the next few weeks Shannon and Finn both bought new tattoos, and Shannon purchased a purebred golden retriever for her brother’s birthday present. It wasn’t long after this that the loan payments stopped and Finn stopped returning his parents’ phone calls.
Three months later Grant and Melody learned that the kids’ had been evicted by the bank and their home had been repossessed. By this time, Grant and Melody were fairly certain that they’d never see their money again.
The young couple moved in with Shannon’s parents, Bob and Carol. Early on Thanksgiving morning Grant and Melody’s doorbell rang. Bob and Finn were standing there wanting to talk. Bob started by lecturing Grant and Melody about the importance of supporting their kids, and then encouraged them to show their love for Finn and Shannon by giving them a financial gift to make this Thanksgiving a time for them to be truly thankful.
Months earlier, Grant had learned some family history about Bob and Carol, which included some serious financial troubles and a home foreclosure. Grant and Melody felt extremely uncomfortable with Bob’s request for money, but said that they would consider it.
Grant and Melody decided not to give any more money to their kids, and when they consulted us we encouraged them to stand firm with their decision.
Often gifts of money do nothing but delay the inevitable and often short-circuit the learning process. We reminded them that just like a drowning man could pull his rescuer under water, they could easily become financially compromised if they continued to bailout the kids. They may lose touch with Finn for a while, but we are convinced that eventually the good values they have infused in his life will help to restore the relationship and possibly his good financial sense too.
What can a parent do?
Grant and Melody’s story is not uncommon. What can you, as a loving parent, do to truly help your children in a financial crisis without jeopardizing your own financial security? We recommend moderate actions to help, while measuring your child’s commitment to real financial change. If his desire is superficial, you’ll soon know and won’t have invested thousands of dollars in a failed effort. If his intentions are genuine, your help may be the best encouragement you could give him.
Here are six effective bailout ideas to help without enabling:
1. Education. Buy him a book on managing finances or debt reduction or pay for him to attend a Crown Ministries or Financial Peace University class.
2. Groceries. Buy him a grocery gift card, several bags of groceries, or put together a care package and leave it anonymously on his doorstep. Everyone has to eat, and this can free up money to pay bills. If he continues to struggle for several months, help him locate nearby food banks or apply for food stamps.
3. Utility bills. Pay a bill or two, directly to the utility company. Don’t give cash to your child.
4. Counseling. Pay for several sessions with a counselor to help your child get back on track mentally, physically, or relationally.
5. Medical bills. If your child is dealing with a serious medical condition and bills are piling up, contact a hospital social worker or a medical billing advocate (BillAdvocates.com). Consider paying a doctor directly for a past-due bill.
6. Practical help. Rather than giving your child money, visit him (even if he lives out of town) and offer to repair, improve, and organize things around his home.
And here are some things that won’t help:
1. Money. Unless there has been evidence of good financial management skills in the past, cash bailouts simply delay the inevitable and create financial dependence, not independence.
2. Loans. Usually a consolidation loan or another type of borrowing isn’t going to solve the problem. But if your child thinks borrowing is the answer, let her go through the process of working with a bank. Bankers are more careful and less emotional than parents. If the banker won’t lend her the money, there’s probably a good reason why you shouldn’t either. If you do decide to lend your child money, write up a contract and stick to it.
3. Cosigning. Don’t do it unless you’re willing and able to pay for the entire item or loan yourself. Once again, if a lender says that they need a cosigner, then they probably think the borrower isn’t credit worthy.
Unlike many governments, we have a limited bailout policy. If our kids dig a hole for themselves, we’ll counsel, encourage, and help them find resources, but we won’t write 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. Albert Einstein agreed when he said, “The significant problems we have cannot be solved at the same level of thinking with which we created them.”
If we bail out our adult kids, there is a great 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, costing even more next time.
Some of you may say, “Not bailing out your kids is totally uncaring. You’re family, and that’s what family is for!” We totally disagree. Is it truly loving to continuously enable self-destructive behavior?
Adapted excerpt from The MoneySmart Family System Copyright ©2012 by Steve Economides and Annette Economides. Used with permission from Thomas Nelson.