Should I lend money to my adult child?

A growing number of adult children are turning to the 'Bank of Mom and Dad' or Grandparents. Your instincts may tell you to be generous because your young-adult child is struggling with a tough job market and challenging economy. So you decide to lend money to your children or grandchildren to help pay for basics like rent, debts owed, transportation, etc.  Or you might decide to let your adult children move back home. Because all parents/grandparents want their children to be successful and ultimately not struggle, right?

This poses a huge dilemma for Mom/Dad or Grandma/Grandpa. You want to help the kids succeed, but in doing so you can jeopardize your own retirement and their autonomy.

Before making the decision on whether or not to lend them money, it’s important to ask yourself these two basic questions:

1. How much if any can you really afford to give your adult child?

   Really consider this carefully. If the answer is nothing, then saying no is what will keep you financially stable. Don't put yourself at risk to help someone else. Look at it like this: if you're in an airplane and lose cabin pressure, you need to put the oxygen mask on yourself before you can help anyone else. If you don't, you can't help anyone.

2. What steps is your adult child taking so they won’t rely on you to lend money?

   If your child or grandchild is not really doing anything to improve their situation, it really is best to say no and encourage them to figure it out on their own. Empowering them to be independent might be difficult, but it's also important.

For more suggestions to help family without breaking the bank, read "How to Help Adult Children Without Going Broke."

Sometimes tough love is the best way to teach family members to take initiative and improve their own situation. If your adult child or grandchild needs a little more personal finance guidance, direct them to a nonprofit financial counselor. LSS Financial Counseling offers free budget, debt, and credit counseling with 8 offices across MN and we offer phone services to anyone in the US. For more info, call LSS at 888.577.2227 or visit our website. Or CLICK HERE for anyone who wants to get started with their free and confidential session online.