love when grown kids ask for money
In the case of the parent-child dynamic, parents can unconsciously use money to control their grown children and children can use continual requests for financial assistance as a way to avoid growing up and taking responsibility for themselves.
Frequently, financial gifts come with unspoken conditions,
Jon Gallo says. He advises a couple to first talk out any request for money from
their grown children. If they decide to give or lend money, make any conditions
clear from the outset.
Yes or no
Handled correctly, either a no or yes in response to a request for money can enhance
the relationship between a parent or parents and child. Handled incorrectly, the
relationship between parent and child can suffer great harm. Parents should consider
several factors as they deliberate.
|Several factors parents should consider: |
financial history. What financial assistance have
you provided to your children in the past? Has it been
in the form of loans or gifts? How has the child used
How will your other children feel about you giving or
lending money to siblings? Have you treated, or do you
intend to treat them equally when it comes to gifting
or lending money?
Do you want to attach conditions to the gift or loan,
such as what it can be used for? Will you make the gift
or loan formally or informally?
Parents should discuss these issues together before reaching
a decision, and may also want to consult with their financial adviser. Either
way, parents should stay on the same page when it comes to the request as difficulties
can arise when one parent doesn't want to provide financial help and the other
gives money behind his or her back.
Frequent financial gifts or continual support have the effect
of creating and prolonging financial dependence on parents and can also bring
parents to their knees financially. Klontz recalls a couple he counseled who were
running through hundreds of thousands of dollars to support their three children
in lavish lifestyles. Looking at the numbers, they figured that their original
$11 million nest egg would be spent in a matter of years.
working with us, the couple were able to tell their children that they would stop
their financial support within the next six months and that no further financial
support would be given unless their financial adviser signed off on the request,"
Klontz says. "That way the kids had some time to deal with the change in
circumstances and within a year or two had sold their expensive houses and moved
into something more affordable."
Loans, when handled correctly, can work to the benefit
of both parent and child. Dr. Glenn Whitman, director of transplantation
at Temple University Hospital in Philadelphia, has lent money to
each of his three sons through a third-party company designed to
facilitate such services, Circle
Five years ago, his eldest son Arthur was in a bind
-- his nonprofit, the Ghana
Education Project, needed funds. Dr. Whitman wanted to help,
but already had maxed out his budget for charitable giving for the
year. So he turned to Circle Lending and with the company's help,
devised a loan agreement that would help both parties. The experience
was so successful that he repeated it when his son Nathanial needed
money for a down payment on a house and his other son, Isaac, needed
help with medical school living expenses.
"When you see your kids,
you don't want to be saying to them, 'You owe me money,'" he says.
"Circle Lending takes all of that out of the picture -- it prevents me from
ever having to deal with it."
While many attorneys will draw up lending agreements
between family members, Circle Lending will also handle the administration
and collection of the funds you lend.
and the actual drawing up of an agreement is available for a flat fee of $99 to
$599, depending on the type of loan; servicing is $9 a month, according to vice
president Jim Smith.
Lenders have lots of flexibility when
setting terms -- they decide whether a grace period is permitted and are consulted
if the borrower encounters a financial difficulty and can't pay. In such a case,
the lender can decide to add payments on to the end of the loan term, forgive
payments or take interest-only payments.