Housing’s a bear for our kids who aren’t homeowners yet. If we offered a little help with the down payment, that might make a mortgage possible. It’s not just housing that’s causing angst. If we helped to pay off a car loan or covered their health insurance, that might ease their anxiety levels.
When we are fortunate enough to afford to help, many of us derive satisfaction from tapping our savings to offer our kids a financial boost. What it comes down to is giving them a sliver of our savings now rather than later when we won’t be around to see them enjoy it.
If we are going to be financial boosters, should that help come in the form of a loan or gift? If we go the loan route, we have to put our banker hats on: Write a contract, set repayment dates, spell out the harms if they default. Unappetizing at best.
Michelle Singletary, the personal financial columnist for the Washington Post, put it this way in a column:
- Give gifts, not loans:
- When generosity comes with strings attached, the situation can get ugly.
- That’s why we need ground rules.
Here’s a paraphrased version of her gift-giving ground rules. She designed them for friends as well as family. I’ve adapted them for those of us who are offering financial aid to our kids.
- Never a lender be. Only give what you can afford to never receive back. Expecting repayment can ruin your relationship or leave you monitoring (and resenting) the way your kids spend their money–especially if there’s a splurge involved.
- Ditch the control gear: Before you give a gift, it’s reasonable to ask standard, up-front questions about how your funds will be used. You should do your due diligence to make sure you aren’t enabling bad financial behavior. However, once you hand over a gift, don’t micromanage it.
- Cut out the middleman: If you want to control the way your kids use your gift–say, it’s money to pay off a car loan and that’s the only way you want your gift used–pay the creditor directly. It’s better than attaching a string–“this is for your car loan”–and then policing whether the middleman (your kid) pays down the loan.
- Go thank-less. “Are you overly concerned about getting credit for your generosity?” is a question Singletary raises. She suggests we veer away from needing regular acknowledgements of our largesse.
On this latter point, Singletary notes that Proverbs reminds us: “Let someone else praise you, and not your own mouth.” And that Matthew cautions: “Be careful not to practice your righteousness in front of others to be seen by them.”
To that I would add this: Blessed are those of us who are able to give the gift and trust our children to use it as they see best.
Sculpture: Auguste Rodin, “Le Penseur”
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