This is the age when money defines everything. It defines parent-child relationships and the bond is nurtured by parents, who make it their responsibility to provide for their children. Parents shower children with material goods and comforts, even at the cost of their own financial well-being.
How to parents provide for children? Parents may use their retirement funds for their children’s foreign education. The medical emergency money kept aside for old age, may be used for a destination wedding. Spending on children doesn’t end with a wedding. Some parents fund their children’s start-up, travel plans or even help them buy an apartment.
Now comes the important question. How much should parents spend on their children? Where do they draw the line? Should they spend their retirement funds on their children? Let’s find out.
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Your child grows from a toddler to a teen to an adult. This is when money comes in the way of the parent-child relationship. The child refuses to pay a joint loan (Father and son sometimes take joint loans), he/she refuses to bear the medical expenses of elderly parents or the parents refuse to bear expenses of a divorced child.
These problems could have roots in the child’s upbringing. Children may not have been taught how to handle money, they depend on finances from you even in adulthood or you have been careless with money or practice bad money habits. These have bearings on parent-child relationships.
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Being a financial crutch for adult children hampers your own financial goals. You won’t get a loan for retirement. If your child is facing a genuine financial crisis, then you must definitely help him. But, if your child refuses to hold a steady job or doesn’t care to bear his/her financial responsibilities, you can offer money. The child must return the money within a fixed time-frame.
Should you fund a child’s business venture? Not if you don’t have the funds. If you are using retirement money to fund a child’s business, don’t do so. There are other ways he can finance the business like loan against securities, gold loan, sell personal assets or even take a business or personal loan. His business would get finances, but you won’t have money for retirement.
You as a parent will definitely pay for any medical emergency of adult children. However, it would be wise for children to avail a health insurance plan. What if your children want money to buy a house or car? Well, offer the loan with joint ownership and clear repayment terms.
If the child needs money for a medical emergency to give it to him. Any other funds offered must be only through loans. You have educated the child and he/she must be able to bear the expenses and financial challenges.
You will have to make a legal agreement, stating the purpose of the loan, the exact amount you are offering, interest rates being charged and even time of repayment. Both you and children must have a copy of the agreement and it must be framed with the help of your lawyer.
What if your child is divorced? Well, you must definitely help your child, but it should be time-bound. This is until the child gets a job to support himself. Keep your other children in the loop. Mention details of the loan in your WILL, so that on death, this amount can be deducted from the inheritance.
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This is a bad idea and is a common cause of parent-children conflict. This could destroy family ties. Many adult children keen to buy their own property, take joint loans with parents. They may not have money for a down payment or can’t afford home loan EMIs alone.
So, parents sign up as co-applicants of the home loan and co-owners of the property. The problem here is both parents and children are equally responsible for repaying the loan.
Now, if the child loses his job or refuses to repay the loan, the burden of repaying falls on the parent. Without steady income after retirement or with heavy medical expenses, parents would struggle with repayments. For the child, if the parent dies midway through the loan, he ends up bearing the loan. If the child and parent fight after a child’s marriage, loan repayment is a major issue.
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