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When your 30 something child asks for money- what is response?
Old 11-18-2009, 12:20 PM   #1
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When your 30 something child asks for money- what is response?

Our 30+ child (single) asked for $2,000 in order to help with refinancing an existing mortgage. The refinancing is an optional event. On one hand we think it is beyond the time when retirees like us should be asked to help out with money, but on the other hand we want to help our children. This is a first time request. Any comments welcome.
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Old 11-18-2009, 12:27 PM   #2
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So, is this a request for a gift or a request for a loan? If you go for the loan, understand full well that it might not be repaid and that will lead to hard feelings.

Personally, I think that anyone over the age of about 25 should be financially on their own, barring extraordinary circumstance like poor health.
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Old 11-18-2009, 12:34 PM   #3
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I learned that regardless on the intent, you have to look at it like it is money gone for good, i.e., a gift.
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Old 11-18-2009, 12:37 PM   #4
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I wouldn't count on your kid paying you back no matter how many promises. Been there and done that.
You know, I admit that I have always done the exact opposite of my parents and probably to the detriment to my son, but I've always been too soft a touch over the years on most things I think.
Except on an issue like this for refinancing: $2,000 is such a small amount of money, I think I would tell him/her to keep at it and make the $2K instead of asking me for a loan/handout.
Bottom line: He/she is 30+, it's a minor amount of money and they could save that themselves in a short period of time...sorry. The kid will have more respect for themself if they do it all alone, anyway. Think of it as helping him/her build character. Just IMHO.
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Old 11-18-2009, 12:38 PM   #5
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My response would be something along the lines of, "We are at point in life where we must focus on funding our living expenses in retirement. So, unless you plan on providing us financial support in our old age, you need to find another source for the money."
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Old 11-18-2009, 12:41 PM   #6
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Maybe executing this refi will save them enough in interest charges and/or cash flow to pay you back on an accelerated schedule. I would certainly entertain the notion of helping them out with their liquidity issue if it would be a good long term opportunity to help them grow their wealth. As long as I figured I was likely to get my $2000 back. Guess it depends on your evaluation of your kid.
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Old 11-18-2009, 12:47 PM   #7
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Is this a situation where the mortgage is an ARM and the payments are going to be over your child's head, to the point of possibly losing his/her home? (hopefully not).

In that case, if I was dealing with my 31-year-old daughter, I would lend the $2,000 and set up a $50-$100/month payment schedule. In the event of deliquency, I would just subtract that from the checks I send to her for birthdays and Christmas until the payment schedule was met (and if she didn't pay me anything, it would get paid off eventually in this way). Above all, while doing this I would bend over backwards trying to keep our relationship friendly and loving, since you only have one family.

If the present mortgage is a 30 year fixed, I would tell my daughter that she needs to save that money herself and that interest rates may be even lower by the time she does that.

Edited to add: This is all pretty theoretical, since my daughter has not asked me for a dime since she left home at age 18. Even when I have offered her money to pay for her dentist and so on, she doesn't want to take it. She is a very proud young lady.
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Old 11-18-2009, 12:48 PM   #8
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I would say no. If your child doesn't have the money to finance the refi, then your child isn't responsible enough to borrow the money. LBYM folks have 6-12 months worth of living expenses in the bank, if not more. Covering a $2k shortfall to close a refi would be a snap. Your child doesn't have the required $2k, which means s/he probably doesn't have an emergency fund to cover real emergencies.

Just curious, what is your child going to do with the savings s/he realizes if the refi goes through? If the answer is anything other than "pay you back, then create an emergency fund," the answer should be NO.
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Old 11-18-2009, 01:11 PM   #9
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Originally Posted by travelover View Post
So, is this a request for a gift or a request for a loan? If you go for the loan, understand full well that it might not be repaid and that will lead to hard feelings.

Personally, I think that anyone over the age of about 25 should be financially on their own, barring extraordinary circumstance like poor health.
Even though I totally agree with you, I must admit that, in the end, I tend to cough up a lot of money on my only child. He´s been pampered cash wise his whole 32 years and.... he takes my generiosity for granted. More my fault than his. He drops hints here and there and I frequently take the bait. Small sums, splendid gifts for birthdays, Christmas, Saint Day etc. His steady job as an industrial engineer can easily pay for his whims but, if I offer to dish out the dough....he never says no
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Old 11-18-2009, 01:17 PM   #10
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Maybe the $2,000 is for closing costs or something for a cash-out refi, and the child will pay the parent back immediately from the loan proceeds?

I'd help out if I could, with the clear understanding that I would be paid back.
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Old 11-18-2009, 01:24 PM   #11
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Although I have absolutely no experience with having a 30+ year old kid...I have been one myself. So, only speaking from my own experiences, I'd say "No". As kids growing up, my siblings and I had it explained to us, that as soon as we were out of high school, trade school, or college, (depending on how far we decided to go) we were given about 6 months to get a job and be on our own financially. For graduation we were given a car that ran, a full tank of gas, and insurance coverage for 6 months....beyond that, we were on our own...period.

At one point in time or another, we each (mistakenly) asked for money to 'help' in some area of life....for me a newer car. And each time Dad said he was happy that we wanted to improve our lives in some way, then added "And when you get your money saved up, you'll be able to afford it."

And our basic attitude was..."Well, I'll show him!" And we did! We saved 'til we could obtain what we wanted or needed. We weren't too happy by his response back then, but I for one am VERY happy now, that he did as he did!!! Because we each were able to prove to ourselves that we could do things IF we really wanted to!

So from a former 30+ year old kid who was told "No" and survived OK....I'd say "No".
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Old 11-18-2009, 01:26 PM   #12
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Disclaimer: I have no children.

I'm assuming this child is w*rking, correct?
My answer would be NO. It is a very small amount and could easily be saved up in a short time by cutting expenses.
I see a door opening that you might not be able to shut from here forward.
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Old 11-18-2009, 01:36 PM   #13
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Ask her "You want cash flow to you too?"
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Old 11-18-2009, 01:53 PM   #14
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Originally Posted by vicente solano View Post
Small sums, splendid gifts for birthdays, Christmas, Saint Day etc.
I have never received a gift on Saint Day!!! I am so jealous. People don't even call on Saint Day anymore...


As for the OP, I don't have kids, so take it with a grain of salt, but unless the refi would prevent a foreclosure, I'd probably say no.
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Old 11-18-2009, 01:59 PM   #15
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Originally Posted by vicente solano View Post
Even though I totally agree with you, I must admit that, in the end, I tend to cough up a lot of money on my only child. He´s been pampered cash wise his whole 32 years and.... he takes my generosity for granted. More my fault than his. He drops hints here and there and I frequently take the bait. Small sums, splendid gifts for birthdays, Christmas, Saint Day etc. His steady job as an industrial engineer can easily pay for his whims but, if I offer to dish out the dough....he never says no
This would put you in my DW's camp, with her 32 yo daughter. Since she is my step daughter and DW has her own fiances, I just hold my nose and watch. I think it makes DW feel good about herself to give her daughter money. When SD has asked me directly for "a loan", I said no.
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Old 11-18-2009, 02:21 PM   #16
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My first thought....


AHHHHHH,,,,, NOOO....


But then I thought a bit more... and almost every one of us kids borrowed money from my parents when we were young... some even when older... every one was a LOAN... I loaned money to go to college (which was offered to me, but I did not want my mom to pay MY college costs)... I paid it back quickly after graduation... I borrowed money for the down payment on my house... and did not pay any back for years.

Now, the reason... my mother charged interest HIGHER than she could get from a CD, but LOWER than what we could borrow from a bank... when interests rates on CDs were 4%, we paid 6%... and we accrued the interest every year....

It was about 5 years ago when I told her she should stop lending (when a BIL took advantage of her kindness and borrowed way to much)... so we closed down the lending bank of mom...


So, for this small sum, I would do it, but charge them interest in the 5% to 6% range... and expect it to be paid back quickly...
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Old 11-18-2009, 02:25 PM   #17
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I have admit I'm a very soft touch were my daughter is concerned .Sometimes too soft so I'd probably say yes and set up a repayment schedule . Of course after she made two or three payments I 'd probably forgive the rest of the loan .
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Old 11-18-2009, 02:47 PM   #18
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Maybe she could get a second job. Our kids are 18 and 22 and I would loan money but do not give them money.
Our 22 year old son had to have a newer car when he was 17 than the clunker we bought him. He bought a $3500.00 car with a loan from us. It was always a loan but when the car was totaled, 2 weeks later, by his girlfriend without full coverage insurance he realized what a mistake he had made. He came to us and said sorry about the car. We said we were sorry too since the loan would be paid back. He turned white as a sheet. We had the money to forgive him but he had to learn integrity. If we started giving out money to him his younger sister was not far behind and maybe her hand would then be out. It took him a couple of years to pay that money back but he did. He spent one entire summer working for my husband carrying bricks and mortar on the jobsite in a very hot summer without pay. Today he is debt free, graduated from a tech school and drives clunkers, his choice. He lives on his own and pays his own bills and I feel we made the right choice in making him responsible when he was young.
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Old 11-18-2009, 03:13 PM   #19
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Maybe I shouldn't comment since I am not a parent. But I have been the recipient of one such loan, so I will!

I think the answer depends....on whether this is a loan or a gift, whether it is the first time, and how responsible the young person is. Granted, we all know of situations in which parents are repeatedly harassed for funds to support drug habits or irresponsible consumerism. But this sounds like a one off request and there seems to be a sound financial strategy behind it. If I were the OP, based on the information provided, I would say "yes" on condition that this is an interest free loan, to be paid off within one year.

The only time I ever borrowed money from my parents was when I was an intern and needed to buy a car. They lent me a sum equal to 25% of the purchase price, without interest. I paid it back within a year (internship is very supportive of LBYM because you have no time for anything except work and sleep!). I was very grateful for the opportunity and had no intention of abusing the privilege. And Mom & Dad wanted to make sure I had a safe vehicle to drive.

OTOH, I was quite determined not to ask my parents to subsidize the downpayment on my first home. I did not want to be obligated to them and I wanted my home to be "mine".

It seems to me that there is room for families to help each other out without always involving formal lenders. It just better be a decent business proposition.
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Old 11-18-2009, 03:18 PM   #20
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Now, the reason... my mother charged interest HIGHER than she could get from a CD, but LOWER than what we could borrow from a bank... when interests rates on CDs were 4%, we paid 6%... and we accrued the interest every year....
I borrowed some money short term to buy my current house at auction. I was a little light on cash since I was still in law school and it would have been hard to get a loan without solid earned income (I significant self employment income from a business however). So I scraped up some cash and then borrowed some from my folks and bought the house and gained many tens of thousands of dollars in instant equity in the process. My parents also benefited since I think I paid them 5-6% interest when banks were paying 2%. They had just cash out refi'd their house with plans to eventually remodel and build on, but in the mean time their money was sitting idle earning 2%.

We all benefited without a lot of risk to my parents, since I was buying a house way below market with their money. Not technically secured, other than by trust and blood.

For me, a big advantage of having wealth in your family is the ability to assist others such as your children in building wealth. If my $2000 could be used to refinance a house and save my kid thousands per year in interest costs, I'd probably loan them the money unless they were just completely irresponsible. I have helped out other family members in a similar manner with similar amounts of money (between $2000-$10000). I have become Bank of Fuego to a certain extent, but I've marked up my interest rates lately to encourage them to treat me as a lender of last resort.

I saved my bro from foreclosure (under $3000 loaned, job loss involved, eventually repaid only 6 months beyond the agreed time).

I've provided some short term liquidity for things like cheap laptops and back to school clothes for the kids, when the alternative would have been much more expensive.

I also mention "in these difficult economic times" and "we are hard up for money too and don't have much in the bank" a lot, so they don't expect loans too often.
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