The concept of earning and saving to pay for what we desire is a sound money management principle and cannot be learned too early in life. Insisting that adult children follow this principle actually affirms their independence.

When Help Hurts

by Norma Jackson Goldman

It was a sad day for a lovely retired senior in my neighborhood. Seventy years old, widowed, and living on a limited income, she was unable to pay an outstanding debt on the home where she and her late husband lived for more than 30 years. Although the original mortgage was paid off, family members experienced financial difficulties. In compassion, she took out a second mortgage to help. The debt increased as more and more appeals for help came. Ultimately she owed more than the house was worth, and unable to handle the debt, the bank foreclosed.

In today’s perilous economic climate such stories are not uncommon. Many parents work well into retirement years to assist adult children and other family members who have lost jobs, gotten into credit card debt, need additional education, or simply prove to be poor money managers.

Most of us grew up in Christian communities where helping others was an integral part of life. We learned (sometimes the hard way) to save and spend wisely, to prepare for an uncertain future, and to assist those less fortunate. And so we should.

But it is also true that people unwittingly and unintentionally encourage bad money management by repeatedly “bailing out” family members. Once a pattern of behavior is established, it becomes harder to say “no” to new requests for help. When family members are concerned, our usual good judgment and sound money management practices are completely set aside by emotional ties.

When Should We Help?

Determine whether the request is a genuine need, not a want. Many young families want bigger houses, new cars, the latest gadgets, and nice vacations—all wants, not needs.

If the need is genuine (a tutor for a child struggling in school, technical training for a young widow) and the parent(s) can meet the need without endangering their own financial stability, they should formalize the agreement in writing.

The agreement may simply state you are making a cash gift, and no repayment is expected. Or, the agreement may say you’re making a cash contribution to be repaid in a certain way, by a certain date, or under certain terms and conditions.

Example: Your grandson needs technical training to get a better job. You agree to give him the money with no repayment expected if he successfully passes the course. If he does not, then you are to be repaid within a specific time frame. Be sure to have the agreement notarized.

Creating a written agreement insures that both parties fully understand your intent, and his/her responsibility. Such written agreements assure there can be no dispute later about what was agreed upon. If the same person repeatedly requests help, the written agreements are a tangible reminder to you both that an unhealthy pattern has developed.

When Should We Not Help?

The concept of earning and saving to pay for what we desire is a sound money management principle and cannot be learned too early in life. Insisting that adult children follow this principle actually affirms their independence.

There are times when it is appropriate to help a family member with debts, but they are rare; doing so only perpetuates inappropriate behavior. It is far better to assist with financial counseling, allowing them to work through the problem successfully. In no event should you provide assistance when it means you will not be able to meet your own obligations, or that you will take on debt you may be unable to repay later.

Successful money management is a critical life skill. Inappropriate financial help may very well undermine or prevent a young adult’s growth and development.

About the Writer: Former magazine editor Norma J. Goldman enjoys a successful freelance writing career in her retirement. Learn more about preparing for retirement at www.boardofretirement.com.