What to do when you're asked for financial help |
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Whether you can even think about helping depends on whether your own worthy causes -- like your
retirement -- are being taken care of adequately. Indeed, experts underscore that giving money in any circumstance
requires that you have funds to spare. "Ask yourself first if you can truly afford it," advises Shomburg.
If discretionary funds are there, you can choose to give, just as you might choose to spend on a
vacation or other indulgence.
Consider your munificence a gift -- even if you indicate that you'd like to be paid back. "If you
say it's a loan, and you get paid back, great. But you'll damage your relationship if you expect the money back,"
says Dara Duguay, director of Citigroup's Office of Financial Education.
The lifestyle boost
Your college-age son wants an apartment near campus, and says he'll pay most of his own food costs and some of the
rent. Or maybe your 26-year-old daughter wants to take an out-of-town job, but won't have a roommate, so her new salary
won't cover single-living.
Young adults may not have a
clue how much to budget for the electric bill or even weekly groceries, since they've never footed these bills, says
Duguay, who is also the author of "Please Send Money: A Financial Survival Guide for Young Adults on Their Own."
Instead of handing out money on an as-needed basis, it's better to set up a
budget together at the outset. Agree
that you'll pay certain expenses, and try to stick with that, Duguay advises.
"Don't give them too much of a lifestyle boost," Duguay adds. "It takes away their incentive to get a
better job or learn how to comparison shop."
Look into Web sites like Buxfer.com or
Mint.com, which allow you to track shared expenses for free. Such
sites are a "great idea," says Duguay, because displaying expenses helps the young adult budget more effectively. Also, it
formalizes exactly what parents will and will not contribute.
If you're not in a position to lend money but would like to help out by
co-signing a loan, think twice about it. Both parties are responsible for a co-signed loan. If the person you were trying
to help stops paying the debt, you are responsible for it. You now have to repay the loan or ruin your credit rating.
Bankrate's
archives are filled with stories about consumers who were burned by co-signed loans.
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