Should You Loan Money to Your Grown Children?

After you've sent your child through college, you would assume your financial obligations are done. But not necessarily. About 65% of college graduates are finding their way back to the empty nest. And, surprisingly, too many college graduates are still letting their folks pick up the tab for everything from their cell phones to internet service. What's more, too often college graduate comes to Mom and Dad for loans and other financial help until they can "get on their feet."

Should you help?

Only you can answer that personal question. But be forewarned, unless you're confident your grown child can pay you back, you may grow bitter when you find yourself still waiting for a payback.

Someone very wise once told my husband and me, "Don't give a loan to your grown kids. Either give it as a gift or don't give money at all. If they fail to repay you, there'll be resentment.

Granted there are exceptions to the rule---there are responsible young people who pay back their parents as soon as they get on their feet. But before deciding to help or not to help ask yourself some needed questions....

*Are they working hard? Do they have good work ethics or do they change jobs frequently and get fired?

*Have they earned a history of paying you back or have they failed continually to keep their promises and financial obligations?

*Are they saving for worthy goals? On the other hand, are they just living from paycheck to paycheck, blowing their money on cigarettes, booze, junk, and other inessentials? If so, your help may actually hinder them from growing up.

*What about their lifestyle? If they buy better cars and clothes than Mom or Dad or make take overseas trips before their folks have even received the chance to travel themselves, then they're living beyond their means.

Unfortunately, most young people who say they need to "get on their feet" never get on their feet; instead, they float through life being carried by Mom and Dad.

And, there are those young people who don't even make it to college or if they do, don't finish. Because they struggle, should you help them?

Again, it's a personal decision. You may help them at first, but if asking for a loan becomes a habit, it's time to close the purse strings and take them totally off the payroll. By continuing to bail them out of their financial woes, you're handicapping them rather than help them grow up. If they never save their money, your giving them money is like pouring your hard-earned savings for retirement down a hole. In other words, don't dip into your 401K and IRAs to bail out financially irresponsible young people.

If you do decide to loan them money, set up a witness-signed document with stipulations on how much and when to pay back the loaned money. The money doesn't necessary have to be compensated back all at once, but can be paid in installments. Let the document be known to other family members so if they'll know their reputation is at risk if they fail to come through with the payback money.

Finally, let it clear (in writing) that if they do fail to pay you back, they shouldn't even bother to approach you in the future for any future loan. They need to realize that paying back Mom and Dad is just as serious as if they were paying off a loan with a bank.