General Question

janbb's avatar

Following on the question about adult children paying rent, what terms might you impose on children you might lend money too?

Asked by janbb (62965points) 1 month ago
34 responses
“Great Question” (5points)

Say they were in a downturn because of health issues or a lost job, would you lend them money if you had it? Would you charge interest? Have a written contract? A payment schedule?

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canidmajor's avatar

With my particular adult child, I am very easy going about stuff like that. There are no strings or conditions, no contracts. I have absolute faith that they will treat me fairly in any repayment circumstance, and I will charge no interest. I am fortunate enough to be financially secure and in a position to financially help them. I am grateful for our relationship.
And yes,I have been called stupid and naïve and gullible by a few.<eyeroll>

chyna's avatar

I can’t speak from the parent point of view, but I can speak from a child borrowing from a parent.
During my divorce, I needed a loan to get me through a few months. My mom loaned me the money and charged me the interest she would have made had she not taken money out of her IRA. Also, she put me and my payments down in the dreaded steno book she kept for her monthly bills. I found out much later that she did the same thing for two of my brothers when they were going through divorces and needed a little help. We have all laughed at being in her steno book. Did it make me mad? No. My mom did so much with so little that it taught me a lot about money management. She also gave each of us a large amount of money years before she died so she could see us enjoy it.
By the way. I also have a steno book for my monthly bills.

jonsblond's avatar

I would ask them to pay me when they can. I would not give a time limit.

Hawaii_Jake's avatar

I have loaned my children money. I don’t impose restrictions or charge interest. I’m sorry I can’t be more helpful.

filmfann's avatar

Following the pandemic shutdown, my daughter and her husband were both out of work.
People in their industry had spoken with them about backing them in setting up a business, where the investor would only put up the money, and would receive 20% of the profits forever.
My daughter was upset. I told her I had faith in her, and I would get a HELOC (home equity line of credit), and it would be her responsibility to repay it within 5 years. (my house was fully paid off)
She paid it off in 3½ years, and her business is a huge success.

jca2's avatar

I wouldn’t want interest or a signed contract. I would trust that she would pay me back, because she might want to borrow in the future and if she didn’t pay it back, I might not be willing to lend it in the future. That said, if she didn’t pay it back, it’s going to go to her when I die anyway, because she’s an only child. I would do what I could to help her, as far as lending her money, as long as I didn’t see her making stupid choices (like having a loser/user boyfriend or abusing substances).

cookieman's avatar

I wouldn’t loan my daughter money. I’d give it to her if I could afford it. I wouldn’t expect it back.

JLeslie's avatar

My parents gave me money when I needed a little help when I was in my early 20’s. It wasn’t a loan, but it wasn’t a lot. $1,000 one time, and then also birthday and Chanukah money, usually $500 each. Also, when they visit me they pay for food and give me some extra money. If I needed to borrow a large sum I can’t imagine they would charge me interest if they even expected me to pay it back.

My husband and I loaned money to his brother and brother’s husband at one point. We did draw up a one page contract with the amount and how much they would pay us every month. It was several thousand. No interest was charged. When I helped my sister with some money I just gave it to her, it was only $1k, no words about paying me back, I was fine if she never did. She did pay me back eventually, but that was completely on her own.

If I had kids I would give them money to make their life easier and to have fun as long as they were making an effort to support themselves and not being entitled. That’s assuming I had the luxury of feeling financially secure and had extra to give.

Parents who have more money than they need I think should start giving the money to their kids earlier rather than later. Waiting till you die doesn’t really help your kids the same way money at a younger does if spent or invested well. Plus, there are tax loopholes for gifting money.

Demosthenes's avatar

While I do not yet have children, I imagine that if such a situation should arise in my future my attitude would be akin to that of @cookieman. I would not loan my children money. I would, however, give it to them if I could afford to do so and trusted that they would use it appropriately. That is how my admittedly rich parents operate. I do not ask my parents for money, but they do sometimes decide to give it to me. I obviously don’t refuse their generosity.

YARNLADY's avatar

For small amounts, we just gift it. We currently have loaned several thousand to family members with a contract in writing, including interest. One such loan went unpaid for so many years I doubt I’ll ever get it back. The others get paid back sporadically.

flutherother's avatar

I have never lent money to my children. I have given but have never asked for it back though they have offered.

Forever_Free's avatar

If I give it, I don’t expect anything back. If they do, that is great.
I would never want them to feel obligated or that I have something over them.
I think it build better self worth in them that way. But that’s just me.

ragingloli's avatar

Well, in anime they, or their children, are often forced into indentured servitude if they cannot pay.

jca2's avatar

What I think might become an issue is if someone has multiple adult children, and one borrows a large sum, which they don’t pay back or are not asked to pay back and the other adult children will be jealour and resentful, perhaps. They might not even know until the parent(s) are deceased, and then their (the other children) inheritance is a lot smaller because one kid borrowed. I could see it causing problems. It’s nice to say “I’ll give the money without asking to be paid back” but it may be the cause of resentment and fighting, if not now, then later.

janbb's avatar

@jca2 That’s a wrinkle I’ve thought about too. If it’s a large sum of money that you gift, should you deduct it in the will if you have more than one child?

jca2's avatar

I think so, @janbb.

When my grandfather died (father of 3 children), a note was found among his papers that said that he loaned one of the children 25k. It caused a lot of resentment among the other two (my mom and her sibling) about one child getting 25k more.

jca2's avatar

I’m also thinking about a friend of mine, whose husband has a sister. They’re in their 60’s. The husband resents the sister because she has never been responsible, with money or with anything else, while my friend’s husband always worked, saved, invested, etc. The sister is now living off the mother who’s in her late 80s, and granted, she’s also helping the mom which is why it’s not black and white. However the sister is funneling help and money to her daughter, so they’re all benefitting. My friend said she told her husband not to expect to get much from the inheritance because of the sister living off the mother and draining the funds.

canidmajor's avatar

All of that brings up the question of how much someone should depend on an inheritance, which, strictly speaking, is “found money”. I have seen families, who have plenty of money, torn apart because of perceived unfairness of bequests, or adult children expressing anger at still living parents for “spending down” the inheritance before they die. I absolutely do not believe that fighting over the remains, like jackals, is any kind of civil.

If one is in greater need than another, adjust accordingly, if you want to.. It’s yours to give, and if your adult children can’t deal with it, it’s too late for attitude adjustments.

Just my take on it.

JLeslie's avatar

@jca2 I think most parents try to make it even eventually. If the parents have the money, I think most give the money to their other children to start evening things up well before dying.

Think about it, if a parent lives to be 90 years old, then their kids don’t get inheritance until they are 65 and 70? Better to utilize or enjoy the money younger. It is not extremely unusual for a child to die before a parent now that some people live so long.

When I got married my parents gave me $10k to make a wedding or use however I wanted and skip the wedding. When my sister still wasn’t married several years later and wanted to buy her own place they gave her $10k towards it. Kind of even things up. They actually spent much more on her education, that was never evened up, because the money didn’t go to her it went to education, which they see differently, and I’m fine with it.

@canidmajor I wish my parents would use more of their money to make their lives more comfortable and fun. It would leave less for me, but I don’t care, I would feel better seeing them live better.

Zaku's avatar

Would you lend them money if you had it?
– Yes.

Would you charge interest?
– F&$@ no. Interest is hostile behavior, not help.

Have a written contract?
– No.

A payment schedule?
– A suggested schedule. I would fully expect it is a gift, though, and would tend to prefer to just have it be a gift, if that’s affordable.

seawulf575's avatar

The answer here is a resounding “it depends”. I have refused to loan money to one child that needed it because I had already co-signed on a car loan and a school loan that she never paid back and I had to. She had proven herself to be a horrible credit risk. However that same child, after hitting rock bottom, had turned herself around and started acting and behaving more responsibly. I did loan her money then. We had the agreement that she would pay us back at a given pace, no interest, etc. She took great pride in holding to the schedule. Since she was getting her feet back under her we set all the money she gave us aside and when she decided to get married we gave it back to her.

Co-signing on loans, lending money, etc to your kids can be a learning thing on both sides of that transaction. If all goes well, you know your child is a responsible adult. If they don’t pay you back but have all sorts of money to go partying every weekend you might learn something else about their character.

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Pandora's avatar

I just recently lent one money and set up a payment schedule. Once a month. There is a minimum amount that’s very doable and of course they can pay ahead. My condition is it better be paid before I need it back. If I don’t have it all before I need it, I will come and live with him and have him support me till I get my moneys worth out of him and it will be with interest. So far working okay. Getting my payments.

Blackwater_Park's avatar

You need to give it as a gift with no expectation of getting it back. I would not impose terms.I decide if it’s something I want to do and the other party is really needing it. Terms wreck family relationships.

Pandora's avatar

@Blackwater_Park It really depends I think on the kind of relationship you have with your children and whether you are unreasonable. I’ve always just given them money but my husband and I are retired now. They understand if they want us to be independent till our old age then they can’t come to us for money. I didn’t lend him money because he was broke. Its because he couldn’t access his cash right away without paying severe penalties. We probably would’ve given him money and not expected if he was broke. But he’s very practical and sensible. Even if we had said no, he would’ve said okay, no problem. He was buying a home and he wanted to put down a larger down payment than what he had access to bring the interest rate down. There are some relatives I would never loan money too because I know I would never see a single payment and they would keep coming back time and again.

LuckyGuy's avatar

A friend of mine has 3 kids. It is well understood that they will get an equal share of his estate when he dies – minus the adjustments in “The Notebook.”

The Notebook contains the date and amount of large loans or help given to the children. The entries are signed by the children and are open for all to see. That amount is adjusted at 3% APR and will be subtracted from their share of the estate. For example: He gave Allen $200,000 to help him buy a house in California where my friend lives. It is not fair to Becky and Carol if the estate is divided equally without subtracting that amount from Allen’s share. Becky is a veterinarian and wants to start a business. She needs funds. He gave her cash to help set up the business. That goes in the book.
He and his wife call it the Bank of Mom and Dad.
The “kids can pay off the loans or not. But it is understood that if, in the future Mom and Dad need it, they will call in the loans.
I like this method. It is perfectly clear and transparent.

janbb's avatar

Thanks for all the input. This is largely hypothetical at this point but to those who say “just give them the money,” while that may be the best option, I think there are a lot more factors in the issue. As noted above, whether there are siblings’ feelings to consider. Also, the amount of the money needed, is it $2,000 or $150,000? How old are the parents and will they need the money at some point? Have the kids been recklessly profligate? How old is the child – 25 or 50? And if they’re married, how would the spouse feel about a gift or a loan?

As with many questions on Fluther, there is not one blanket easy answer.

SnipSnip's avatar

Neither borrower nor lender be.

I would not lend more than a couple hundred dollars for an emergency. There would be no terms and I would not expect to be repaid.

janbb's avatar

@SnipSnip Do you have children?

LuckyGuy's avatar

@janbb For background, in my example above the parents, retired MDs, are in their early 70’s. The “kids” are in their 40s. One of them, is the executor and already has an Excel spreadsheet that calculates the amounts at the push of the update button. All three have copies of the spreadsheet.
“The Notebook” with original signatures is the master.

SnipSnip's avatar

@janbb Yes. Two.

JLeslie's avatar

@LuckyGuy Interesting. It kind of reminds me of two people I worked with who were Indian, and the kids were expected to pool the money with the parents (to help out) but also, I think everyone was aware of the finances. Your example the parents have the bulk of the wealth, and in my example no one could be considered wealthy; although, maybe as an extended family they had a decent amount of money all combined.

jca2's avatar

@SnipSnip If your adult child(ren) came to you and said they had an emergency, like their car broke down and they needed cash to pay to fix it (or to pay off the credit card bill) or had an unexpected bill that needed to be paid off (IRS, medical, etc.), or something, you would refuse, except for a few hundred dollars?

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