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Kimberly Palmer, U.S. News and World Report’s Alpha Consumer, dropped me a line over the weekend. For an upcoming article, she’d like to interview someone who has struggled over whether to lend money to parents. If you’re willing to share your experience (and to identify yourself by name), please e-mail her [alphaconsumer *at* usnews.com] by Tuesday night.
Kimberly’s e-mail reminds me that this is an important subject for many people. Most personal finance advice deals strictly with the numbers, yet it’s the other stuff — emotional, psychological, and relationship issues — that can be most difficult to master. Here are three related discussions from the GRS archives:
- Money blueprints: What our parents taught us about money
- Ask the readers: “I’m doing well financially but my family is not”
- Financial advice from my father (when I was 19)
And here are some related articles from around the web:
Last week at Tough Money Love, Mr. TML noted that bad financial judgment tends to propagate down the family tree. As with many behaviors, we learn how to deal with money by observing what our parents do (or don’t do). We ape the actions they model. And then, when we have children, we pass along these same habits, both good and bad.
Jonathan at My Money Blog shared the story of a fellow he recently met who is engaged to be married. This man’s fiancee, however, has a radically different attitude toward money than he does, prompting Jonathan to ask, “Can love overcome financial incompatibility?” (We’ve discussed this at GRS many times in the past.)
Finally, it’s not just U.S. News and World Report that wants to write about how money affects relationships. Other big media publications want in on the action. Time recently explored the connection between recession and divorce. Meanwhile, Ron Lieber, who writes the “Your Money” column for The New York Times, wonders if the economic crisis means we’ll have to bail out our own family members.
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November 10th, 2008 at 4:58 pm
Agree that personal finance habits can run in the family; however, I have seen many of my friends improved their personal finances than their parents. I believe regardless of background - it is possible to learn and apply good personal finance habits to build a secure future.
Cheers,
A Dawn Journal
http://www.adawnjournal.com
November 10th, 2008 at 5:10 pm
JD - Thanks for the mention. Money and family is a huge issue, particularly in families like mine with many siblings having radically different financial circumstances. The issue of parental help to children implicates questions of fairness and the biblical concept of providing diferent levels of help “each according to his needs.” That’s the way our family seems to approach things.
November 10th, 2008 at 6:00 pm
The article on the fatherly financial advice was stellar. I’m 19, and it reminds me of my father’s advice.
November 10th, 2008 at 6:24 pm
What a timely article this is. My mother’s health is poor and I spoke with her today. I volunteered to pay her past due three hundred dollar bill so she can get medical care. My husband and I have four kids all six and under. I have six adult siblings and as far as I know they are NOT helping her. This is a personal family matter and I know my mother is not happy that she needs help with her bill.
sigh
November 10th, 2008 at 8:11 pm
i was just trying to help my sister cope with her own financial messes the other day. i don’t have any money to give her, so we spent some time talking about finances and trying to understand what’s important and what should take priority. i put an emphasis on learning from her mistakes. she seemed to think our dad would bail her out, but it seems that wasn’t the case. at her age, she needs a little tough love to get her act together.
http://lalaleigha.wordpress.com/2008/11/07/on-being-a-big-sister/
November 10th, 2008 at 10:56 pm
I once let my brother move in with me because he was going through a divorce and just could not live with his wife anymore. He wound up losing his job… quit it, I think? And didn’t get another one right away. I had to kick him out. But I couldn’t afford to have him there eating up all my food. Had I been making a good income I would have been fine with him staying.
Likewise if I were making good money now, if anyone in my family needed help I would be happy to take them in as long as they didn’t do anything criminal. It’s my family, you know? I owe my life to a couple of them, and anyway, I’d like to know how we got to the point that we treat our families little better than we’d treat the homeless guy on the corner. Most of the world understands that you take care of your own.
Now as to the question of whether to lend money to parents. My first choice would be to make it a gift. See what I said about owing them my life. I would do it gladly if I had it to give. I feel like lending money to someone you know well is putting them at your mercy and it will place a strain on the relationship to the point it may never recover.
November 11th, 2008 at 3:28 am
I wrote an article yesterday about the differences between my girlfriend and I share when it comes to personal finances. I outlined some ways that I can satisfy her and enjoy our relationship, without spending so much money. I hope that love is enough to outshine financial philosophy differences.
Caleb
http://www.mefinanciallyfree.blogspot.com
November 11th, 2008 at 4:48 am
For me, I think the issue is ‘lending’ the money. I have seen that lead to breaking family relationships, or ongoing criticism and judgement by the ‘lender’ on every single financial decision (however small) the ‘debtor’ makes until the money is paid back. I like the approach of some friends of mine who are very well off, but both come from very poor backgrounds. They are generous, wonderful people but they never lend money to family and friends. They only help if they feel they can GIVE the money to the person needing help (and they do often help when they can). It’s a gift, no strings attached, and if the person gets back on their feet and wants to pay it back, that’s fine, but there is no expectation of it.
November 11th, 2008 at 5:44 am
Definitely think parents pass down habits. I know my parents never received a financial education from their parents. And I grew up thinking it was perfectly normal to pay for things on credit. My parents always paid the bills, but it wasn’t until I educated myself about interest rates and how much more you pay for using credit that I changed my habits. Now I don’t ever want a new car. I’d rather pay in cash for a vehicle than to pay interest.
November 11th, 2008 at 7:00 am
This is such a tough issue. We’re dealing with family money issue with Mr Chiot’s mom. She wastes her money and then expects all the other family members to bail her and buy her the things she needs like cars, tires for her car, home security systems (etc). She’s not generous with her money to anyone else but feels entitled to everyone else in the family’s money. Unfortuneatly, everyone else in the family gives in to her and they’ve been enabling her, her entire life. Now they’re getting tired of helping her out and always buying her things and they want us to take over supporting her (mind you she has a good paying job, good health care, no car payment, and a $100/month mortgage).
It’s a tough situation because she often makes comments that she’s going to be living with us and we’ll be suporting her in the future. She was an alcoholic mother that never really took care of Mr Chiot’s. He started supporting himself as soon as he could get a paper route (in high school he had to buy most of his own groceries and other personal products). She didn’t help with college costs or anything else, and rarely even buys us a Christmas gift. She often reminds him that she bought him a bicycle once and a pair of shoes and because of that he owes her. It’s a tough situation because we don’t want to enable her. We also don’t feel like we need to pick up the slack because everyone else in the family is tired of giving her money. She needs to learn to live within her means and take responsibility for her actions. We’ve offered many times to help her develop a budget and live within her means, but she refuses, and just asks for money. We feel like as long as she is not willing to help herself, we’re not willing to help financially either. We have been ostracized by his family for this decision, but we’re sticking to it. She doesn’t need help to continue to waste her money and other’s. She need tough love and needs to learn to take care of herself and not take advantage of those around her that care for her.
November 11th, 2008 at 7:07 am
With helping family members, it depends.
Helping someone who’s shown responsibility but fell on hard times, or helping someone who made some dumb mistakes, learned from them, and is trying to rebuild are one thing. “Helping” out someone who shows a continuing pattern of irresponsibility and carelessness is something else.
In the prior cases, I’d be happy giving money if I could afford to do so (and under some circumstances, even if I couldn’t afford it without great difficulty). In the latter case, I’d probably make it known that I was available for advice and help strategizing, if such assistance was wanted, but not to be a human ATM.
Discussions like this frequently tend to devolve into arguments about which of the three categories “most people” who are struggling fall into– but I don’t think one can really generalize. There’s no such thing as “most people”. There are plenty of people in all three.
November 11th, 2008 at 7:53 am
Ugh. We are about to be bailed out by my parents. I hate that it’s come to this. I have a part time, work from home job, but the company I work for is slowly losing business so my hours are dwindling. My husband has been out of work since a serious injury 8 months ago. He was a car salesman but by the time he had completely recovered they didn’t need him, because no one was buying cars. He finally got a part time job at a pizza place making minimum wage, and occasionally substitute teaches. What he makes doesn’t even cover our COBRA premiums each month, and we have to be on it until June. Since when does an intelligent, outgoing, college educated person have such a hard time finding a job, any job? Our savings has finally run out. We live in a smallish city, and next month we’re breaking our lease and moving in with my parents in a big city, hoping he can find a full time job, or 3 or 4 part time jobs…Maybe I can get another one too, while the grandparents watch the baby…We are so thankful for such a supportive, caring family, but it really hurts to feel like a failure! We just want jobs!!
November 11th, 2008 at 11:19 am
I think the decision to help family depends on the family member. Fortunately, my husband decided years ago that he would not help his father financially in the future. He is 65, has always been financially irresponsible and likely has very little to no savings. My husband loaned him money when he was in his 20s and as he expected, it has never been repaid. When the time comes, if he wants help, we will help him apply for government benefits as he needs them.
His mom and step-dad will be a tougher call because we are closer to them. However, they actually plan for the future and worry about it. Fortunately, they have a good retirement income, even if they can’t live within their means right now.
We do put away $100 per month for his grandmother, 93 years old, who has almost outlived her assets and relies on social security.
I can relate to the frustration that when money is loaned and not repaid. We have our cell phones on a family plan and we pay the bill each month. My husband’s parents are supposed to pay their half, but don’t. We are trimming expenses with the second baby coming and it is frustrating that they spend like crazy, take vacations and yet can’t seem to reimburse us the $1300 they owe us, or even start paying the monthly amount.
I owe my mom about $20k from when she held the second mortgage on my townhouse that I sold at a loss. Since I am staying home with the kids, I earn very little. Almost all of what I do earn goes to her. Payments are sporatic and mostly they cover interest. But there is a formal note in place and I track the interest accrued, even though my mom doesn’t care about any of that. I haven’t sensed any frustration on her part, likely because she knows that it will be repaid, and they don’t need it right now. She knows that I have never treated it as a gift. When I had my townhouse, I executed a note and deed of trust so she was secured, and a new note when I sold it at a loss.
November 11th, 2008 at 9:02 pm
I would have to venture a guess and say that most people who have been in a marriage would agree that finance can cause a ton of stress on a relationship.
Besides kids, there probably isn’t a great cause of tension in a marriage then money. I think it’s very important to take a financial compatibility test before getting getting engaged. Like the results or not, at least you’ll have an idea about your potential spouses views on finance, spending, and saving.
November 11th, 2008 at 10:19 pm
The thing that kills me is that I have to work long hours on school nights in order to earn money so that I can pay for my education (and blog domain hosting of course)and earn my degree in Business. Then I have friends to go out drinking on Tuesday nights because their parents give them money so they can take bird courses in school and go out whenever they want..
I just wish i was good at handling this kind of stuff because it usually ends up stuck on my mind