Should you Lend Money to Your Children?

When children need anything, as parents, we do what we can to help them. As young children they are completely reliant on parents so we buy them everything that they need from food and clothes to toys and books. However, there comes a time when parents tend to leave children to look after themselves. This tends to be once they start earning money and have left home. However, there is still a tendency to spoil them and make sure that they have everything that they need. Sometimes this even leads to parents lending money to their children. But is it a sensible idea? It may seem a good idea initially but it is worth thinking it through to make sure you are completely convinced.

A lot of borrowing that is done these days is to pay for items which are not necessary. By borrowing money to pay for luxuries we are paying far more for them, due to the cost of the borrowing and therefore wasting money, compared to saving up and then paying for the item. If parents lend money to their children for things like this, they will get into the habit of borrowing rather than saving. If the loan is free to them, which often is the case when parents lend to their children, it means that they will get used to borrowing without any consequences. Then when the parent is no longer able to lend money, they child will borrow from a lender and have to pay the interest and fees. They will be in a habit of borrowing and think that it is the way to buy things and therefore it could be too late for the cost of the loan to have enough impact for them to change their ways. By teaching children to save up for things and not to borrow unnecessarily, this will be a far better lesson for them and they will be far better off in the long run as they will not be spending unnecessary money on borrowing money.

Of course the children may be borrowing for essential items. They might want to borrow money for a deposit on a mortgage, to pay for bills that they cannot afford or things like this. In this case it can feel like you have no choice but to help them, particularly if they have no available money and cannot get a loan elsewhere. No parent wants to see their child struggle and suffer but you may still be doing more harm than good if you do lend to them.

Lending money to children can also have an impact on your relationship with them as well as with your other children. They may think that whenever they need money they can come to you and if you are not able to help them when they need it, they might get annoyed with you. They may start to rely on you for money and if you are not able to help them they may get cross with you. You may also find that other children want help as well and want to borrow money from you. If you do not have enough to help them all, that could put pressure on you and could cause jealousy between them and affect your relationship with them and all of your other children. It could affect their relationships with each other as well.

It can be much more valuable if you help your children to understand the benefits of saving money for an emergency so that they do not need a loan. Also show them how to spend well and earn well so that they have enough money available to save some each month. If they do not learn this, but learn that they can keep on borrowing money as often as they like, they could end up with a lot of debt and not understanding how to look after their money well. It can be very hard refusing your children things that they want. However, you could be doing them a big favour by refusing as they wil have to learn how to save up as well as learning about the pitfalls of loans. You will also not be risking damaging your relationship with them and your other children.

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