In the US, children are not given basic financial education in the school. Therefore, they fail to exercise financial discipline and end up incurring overwhelming debt. So the parents of the adult children should inculcate good spending habit as it’ll help you avoid getting into the trap of debt. Here are the following points that the parents should keep in mind while dealing with the financial issues of the adult children.
1. Evaluate your and your child’s personal finances when you are planning to offer financial assistance to him/her. If you find lending money is difficult then reconsider your decision of extending financial help to your child. If you think that you can afford financial assistance and it’ll pave the path for him/her to become self sufficient then offer help to your child.
In some cases, when your child is capable of qualifying for a mortgage loan then you can make considerable amount of down payment on his/her behalf. Make sure that you frequently review the personal finances of your child and create a budget plan as it will help to understand what he can afford and what he can’t. It’ll be difficult for your child to manage his/her finances unless the child has a bird eye view on his/her personal finances.
2. Creating a formal agreement for repayment of loans can sound weird when you are offering financial assistance to your children. The parents can create an agreement when they are planning to lend money to their children. You can compel your children to make a monthly payment by setting up a repayment plan as well as charge interest rate on the owed amount. Make sure that you set penalty charges when they default on payment. Therefore, penalty charges might force your children to avoid skipping payments.
3. Make sure that your adult children are aware regarding the evils of credit card abuse. You need to expose the reality regarding the teasing offers that the credit card companies often propose to the consumers. You need to calculate and show how the reward points actually cost them more in the long run because of the finance charges on the cards.
4. Make sure that you take financial education classes for your children as it will help them exercise financial discipline. If they follow a stringent budget plan then they can avoid reckless expenses. Therefore, these are the four important points that you are required to keep in mind when you have to deal with the financial issues of the adult children.
This article has been contributed by Diana, a freelance blogger. She loves to write on different financial issues like debt, mortgage, money management, etc.
Earnest Parenting: help for parents of adult children with money issues.
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