‘Mom, Can I Borrow $5,000?’
When your grown kids ask for money . . .
when to say ‘yes,’ how to say ‘no’ —and why you
must consider your own financial future first
By Victoria Secunda
here was a time when Martha*, 54, dreaded the phone—it might be a call from her daughter, Debby, 28, asking for money. These were supposed to be the golden years for Martha and her husband. Both retired, they had recently had a mortgage-burning party and were hoping to travel. But then Debby, a struggling actress, was hospitalized with pneumonia. On top of that, her car needed new brakes. Guess who paid the bills?
"How could I refuse?" Martha says. "These were legitimate expenses. Still, it was always something. I worried about her. But I worried about our future, too. I had to cash in a CD to send her the money. And I wondered: When is it our turn?"
Few parent-child issues are as highly charged as those involving money. It can bring out the best and the beast in parents and their progeny. While many adult children wouldn't dream of asking their parents for handouts, others don't seem to be able to leave home, metaphorically or literally. The conflict such family "business" can create is the stuff of Shakespearean drama, an emotional brew of love, guilt, obligation and rancor.
Many parents are caught in a quandary, wondering whether giving financial support to their grown children is the best thing they can do for them and worrying that if they withhold financial aid their children will think they don't love them. Says University of Minnesota professor Kenneth Doyle, Ph.D., a psychologist and financial planner, "Money passes between parents and children as money, but it also passes as meaning. The financial and the psychological parts go together." And as much as parents may be glad to assist a child financially, sometimes the line between the child's needs and wants and their own can be very thin. "Some kids are stuck in childhood," says psychologist Lawrence Kutner, Ph.D., "and some parents hold their kids back. If you make it too easy for them to be dependent, you are giving the message, “ ‘You're still a child'."
To be fair, the current economic downturn has put the squeeze on countless adult children, many of whom face a workplace bereft of job security, pensions and health insurance. These "kids" didn't grow up during the Depression, when more than a quarter of the labor force was out of work. Most young adults today are unseasoned in the ways of sacrifice and belt-tightening; rather, they're used to being bailed out. Says Doyle, "We've taught them to expect it." And when parents don't automatically fork over, many children are stunned.
Just ask Doris, 59, a divorcee. Doris's daughter, Nancy, 30, who
recently began graduate school, thinks her mother, who's paying for her
education, is "cheap" because she urged Nancy to go to a state university so that she would have money left over for a nest egg when she graduated. Cowed by Nancy's name-calling, Doris reluctantly agreed to send her, instead, to a private university.
What Would You Do?
Why is it so difficult for some parents to say no to their kids—and when does saying yes become more a matter of control than generosity? I posed this and other questions to a variety of psychologists, estate planners and financial advisors. And while they all used the term "judgment call," they offered these guidelines to minimize parent/child money disputes:
*Know Your Money Style. "People's beliefs about money can be traced to the 'money messages' they received from their families while growing up," says Olivia Mellan, a Washington, D.C.-based psychotherapist who specializes in money-related problems. Depending on your personality and history, you could be what she calls a "hoarder"—it's hard for you to spend money on yourself. Or maybe you're a "spender," unable to delay gratification or to save.
Your financial style will shape your children's money beliefs and fears. An awareness of past influences, Mellan says, will help you to recognize and perhaps alter destructive behavior—for example, using money to dominate your children, or hocking your financial future to ensure that they'll love you.
*Don't Be Embarrassed to Talk about Money. Parents tend not to talk about finances with their kids; witness Doris, mentioned earlier, and her daughter, who perceive each other as "spoiled" and "tight," respectively, because they have never calmly discussed the subject.
It's crucial for parents and children to communicate their feelings about money to one another. Says the University of Minnesota's Doyle, "Once you get past the surface stuff—money as a tool—you can find out where each of you is coming from." Of Doris's case, he says, "She may be scared that her daughter, whom she cares for deeply, is going to be hurt. If the daughter understands that Mom's just trying to keep her safe, that puts a different light on it."
*Keep Financial Arrangements Businesslike. Dr. Kutner believes that if a child asks for a substantial loan—say, $5,000—the terms should be put in writing. "You treat your children with respect when you make such a loan a businesslike arrangement," he says, "and it removes much of the emotional overlay." And what if the child recoils, feeling that this implies a parent's distrust or lack of love? "Then he shouldn't get the money," Kutner says. "I mean, welcome to the real world."
Which is not to say that you'd clap your children in irons for
nonpayment. The point is to empower them to be autonomous by teaching them. "Your goal," says Kutner, "is to help them learn to solve problems and to be independent. You can say, ’If I lend you this money, how will you pay it back? How else might you obtain this money?'’ Sometimes the best thing you can do for either your child or yourself is to say no."
*Learn to Let Go. The bottom line is for parents to remember that even though their kids are still their kids, once they're grown they are not children anymore. The best gift you can give them is the ability to live
fulfilling lives without you. This does not mean sacrificing your affection
and concern; it means giving up control. When parents and children no longer have the power to push each other's buttons through money, what is left is nothing but love.
A Guide for Borrowers:
Some Valuable Lessons for Adult Children
t's as thorny to ask for money as it is to give it. Here are some questions to pose to yourself before hitting up Mom or Dad for money:
$ Am I trying to duck interest payments? If so, then you are taking
advantage. Your parents very likely are forfeiting income on their accounts in order to make funds available to you. So be fair and offer to pay interest—give them the option of telling you not to bother.
$ Am I trying to avoid responsibility? Let's be honest: We tend to borrow money from parents because we know they won't foreclose on our homes. Which is okay—assuming you are willing to put a loan in writing and make every effort to stick to a strict repayment schedule.
$ Will borrowing money mean they can tell me what to do? You can't blame them for trying—it's their nickel. But make sure the terms—and expectations—are clear. For example, a parent may be willing to pony up providing you give part of the amount to charity (a true story), or if you agree to live close to home. Only you can decide if the "price" is right.
$ Will I jeopardize my parents' security? Dr. Doyle tells the story of a woman who loaned her son her entire life savings. He lost it all in a poor
business deal and financially wiped out his mother. Most parents aren't
rich; the average net worth of people over 65 is less than $100,000. So
think twice before tapping into it.
*All names of parents and children have been to changed to protect privacy.
Victoria Secunda is the executive editor of MAKING BREAD magazine. This story is an abridged version of “Giving or Taking Family Money?”, by Victoria Secunda, which appeared in the Reader’s Digest magazine New Choices and won the 1995 Outstanding Article Award for a Service Article from the American Society of Journalists and Authors.
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