Can Bailing Out Your Child Do More Harm Than Good?

Teach Good Money Habits

( Student loans, credit cards, and mortgages; it’s no wonder that millions of Americans find themselves buried in debt at a young age. The problem with debt is that once you’ve dug a hole, it’s often difficult to climb out of it, especially when you factor in interest charges that exceed your minimum payments each month. For this reason, many adults are turning to their parents for financial help. This, in itself, is a tricky subject because as a parent, you have to decide between helping your children or letting them figure out how to eliminate the debt themselves.

To Help or Not to Help?
As a parent, you might feel that helping your child out of debt will give them a chance at a successful future, and for some that may be true. However, many times this train of thinking backfires. Working their way out of debt helps your child learn, albeit the hard way, that they are responsible for their actions. If they are consistently bailed out, it’s likely they’ll keep repeating the same mistakes that got them into debt in the first place.

Teach Your Child Responsibility
When it comes down to it, it’s best to use the experience as a learning lesson — the first time. Teach your child responsible spending habits, ones that don’t involve relying on a credit card. Instead of paying off your child’s debt outright, consider loaning them the money instead of gifting it. In the meantime, you’ll help them pay off the debt without racking up high interest charges, but you won’t be giving them a get-out-of-jail-free card.

Treat it like a real loan. Charge them interest and create a promissory note that reflects the payment amounts and frequency. You can always set the interest aside to gift back when they finish paying off the loan. If they land back in debt, don’t be so generous the next time. Tough love has its benefits.

Don’t Hurt Your Finances
While the desire to help your children may be strong, if it’s going to hurt you financially, you’re better off not doing so. There’s no need to bail them out only to put yourself in dire straits. Instead, help them find ways to cut down on their budgets, or even create a budget if they don’t already have one.

When it comes to debt, less is always more. If your child is sinking under a mountain of credit card and loan bills, a financial expert can help them get their finances back under control. Be supportive as a parent, but do so from a spectator’s position.

~Here’s to Your Financial Health!

Copyright 2021,