Get honest about your own financial well-being. “Parents need to make sure they can afford to give the loan,” says Kobliner. “Just like a flight attendant instructs you to secure your oxygen mask before your child’s, I’m telling you to secure your own finances before you can help your kid. If you’re not on track for retirement, or you’re paying off high-interest debt, then you simply can’t afford to bail out your kids. Remember your kids have more years than you do to earn, save and pay off a loan—so they’ll find a way.”
This is a prime opportunity for parents to be accountable for how they’ve taught their kids to manage money and get to the heart of why they now need a loan, Chatzky notes.
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“If there is no way kids can take out a loan from a traditional lender, ask yourself why there is no way,” Chatzky says. “What is the problem? Where is that rooted? Has the problem been solved? Is it only a lingering credit report issue? Or something bigger? Do I feel fully comfortable that my child is responsible enough to really pay me back?”
Before entering into a loan, one last option to consider is making a one-time gift to your child, she adds.
If you aren’t dependent on getting the money back and can be comfortable financially and emotionally, it may be better to offer your child the funds gratis. Once.