Should I Lend Money to my Children?

When your children ask you for money then you might automatically let them have it. This could be as a gift or you may lend it to them. Many parents will do anything to help their children out and see this as an additional way to show how much they love them. However, this can be a mistake as it is possible that you will be doing them more harm than good.

Bank of Mom and Dad
There are many children that rely on the bank of mom and Dad to keep them going. They might turn to their parents when they run out of money and ask to borrow from them. This can lead to more and more loans and the amount that they owe can really add up. This can mean that parents are out of pocket and they may feel that they should not ask their children to repay the loan. Even if they do ask for repayments, they may feel that they cannot ask for any interest or perhaps they do not want any interest.

It can feel like a really kind thing to do for your children. Looking after them and seeing them happy is something that parents want to do for their children. Therefore, if children need money then it can seem to be the right thing to do to help them out. This is particularly true if they have a low credit score and cannot get a loan or if the Prime rate is high so they will be paying a lot of money for their loan. However, it may not be the best thing to do, for a variety of reasons.

By allowing your children to borrow form you and get money now, you may be making them less responsible with their money. They may become reliant on you letting them have all of the money that they want and therefore not be careful when they are spending. It might be that you will be letting them have money whenever they need it without checking what they are spending it on. This could lead to them being really reckless with their spending. Imagine what you might be like if you knew that you could get money whenever you needed it. You might start buying everything that you want without any thought about how much it will cost or repaying the loan.

You need to think about whether this will prepare them well for the future. You will run out of money eventually or you may not be around to give them any. This will mean that they will suddenly be at a point where they will have to change their spending habits and they may not know how to. It can be hard suddenly having to stop spending money and think carefully about what you are buying. The longer that you have been able to go on without worrying about it; the harder it will be to change the habit.

This sort of behaviour can also lead to problems with relationships in various ways. It could affect your relationship with them if you need the money and regret lending it to them. They may also get annoyed with you if you stop giving them money because you feel they have had enough. There could also be jealousy from other siblings or family members if they are not leant any money, especially if you have run out of money so cannot lend to them. There may even be problems with your children’s relationships with their partners if they do not think they should be borrowing from you.

So although you may feel that lending money to your children is a very kind thing that you can do for them, you need to think about the consequences that could come about as a result. You may find that it actually leads to more problems. Consider how much you are lending, how long for and whether you want it repaid. Some parents may just feel that it will be sorted out when they die and the child’s inheritance will be less as a result of what they have borrowed. This could work out okay, but it may mean that there could be arguments between siblings about quite how much each is due to inherit especially if there is inheritance tax to pay that the sibling that borrowed money would not have paid on the money that they got. It can get rather complex.  

Therefore, do not lend money to your children without thinking hard about the consequences, both for yourself and them. It can be hard to say no like this but it may help them and you in the future so it can be for the best. If they do need help, then you may be much better off sitting with them and helping them out by showing them how they can change their lifestyle to manage better.

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