Saying Yes, Saying No When Adult Children Ask for Money

By Carolyn Campbell

Kathryn Day's son was in difficult straits. He was a single, custodial father battling colon cancer. When his car quit running, he asked his mother for money to buy a new car. "At the time, I was trying to qualify to buy a home," she recalls. "If I co-signed on the loan for him, I wouldn't be able to buy my home." She was in agony about the decision. "It was hard to say no to this 30-year-old child who had a cancer diagnosis and heavy responsibilities," she recalls. "Yet he'd also had a lot of really good times with his credit card and now had bad credit."

With a heavy heart, she declined his request for money. " I agreed to drive him to some dealerships that offer slightly higher interest loans," she says. "I didn't co-sign anything, but I reviewed the documents and supported him in making a connection with a reputable dealership that offered loans to people with problems. He got the payments set up for a loan he could finance. The outcome was that he even established a new credit history," she says.

Kathryn Day is far from alone in receiving a money request from an adult child. Certified senior adviser Boyd Casselman recalls the day when a 79-year-old single male client told him, "My daughter and son-in-law want to borrow $20,000 to pay off a medical bill. They don't have insurance." When Casselman responded that hospitals have payment plans, the client said his children didn't feel they could afford that option. They also said they'd rather not borrow against their mortgage. "They didn't want to use their own resources," says Casselman. "Instead, they preferred to borrow $20,000 from a senior citizen who has limited retirement and savings."

Casselman frequently consults with seniors whose adult children ask to borrow money. "Some adult children look at their parents as an endless supply of cash, and many seniors feel a real conflict when their adult children ask for money."

Parents Want to Help Their Children

“It is a natural tendency for parents to want to help their kids out when they hit a rough spot at any stage of life,” says Nancy Stallings, program manager for the caregiver support program at Salt Lake County Aging Services. "It is really important for parents to think about the implication of the request, as well as consider their own needs."

She adds that there is such a thing as enabling adult children—or anyone else, such as a neighbor or family member—to stay dependent. We can be part of the problem instead of them solution if we help establish them as someone who always needs help. "If we keep bailing them out instead of saying, 'It's time you figured this out,' how is that helping?" Always granting their requests could ”teach them that, over the long term, we approve their dependency or irresponsible spending," says Stallings. She adds that, sometimes, saying no to a money request forces an adult child to "dig down and figure out solutions to their problems. If we always bail them out—particularly with chronic money requests—they have no motivation to change their behavior."

Stallings feels that by the time parents have supported children through high school and provided the opportunity for an advanced education, “they are adults and it's time for them to grow up. It's time for the National Bank of Mom to close."

At Times, Saying Yes Might Be the Right Answer

Sally Gowans knew that her daughter, Kathy McCormick, was having the worst year of her life. Kathy's husband suddenly left her for another woman. Her ten-year-old son, Ben, remained partially handicapped after he was hit by a car. Along with suffering brain and leg injuries, Ben remained unconscious for five weeks during his hospital recovery. Feeling compassion, Gowans called her daughter to say, "You need help." Looking back to that time, Gowans recalls, "I knew that Heather had all the bills to pay, along with adjusting to her new situation." Mom and daughter—who had a history of being financially responsible--treated the money transaction as a loan. They created a contract listing the amount McCormick would repay monthly along with interest charges. "She paid every dime back," says Gowans.

Gowans saw similar results when she loaned another daughter, Joan Taylor, money to purchase a house. Again, the arrangement was a loan. "My husband suggested I loan the money to her with the idea that after he died and his pension payments ended, the money she repaid me could serve as an income for me." Gowans recalls. Both parties again agreed to a contract that included repayment details and interest payments. "She paid faithfully, every month. Those payments gave me additional income," says Gowans. "Within one year of paying off the loan, my daughter died of cancer. Her husband then completed the payment."

Be Honest in Setting Boundaries

Kate Roberts was surprised to hear from her daughter. The two had been estranged since Roberts and her husband divorced seven months earlier. But now, her daughter Brittany was calling to say that she planned to marry. "She called to ask how much money I could contribute to the wedding," Kate recalls. Recently divorced, Kate felt that she could afford to spare $700--less than half of the $1,500 she was informed that her ex-husband planned to borrow to help pay for the event. "I was honest with Brittany about what I could afford," she recalls. "I felt it was important for her to realize my limitations and that I wasn’t willing to go into debt. I told her that if I didn't budget my money wisely now, I might have to live with her after I retired. She definitely didn't want that to happen," Kate laughs.

Kate reassured her daughter that along with providing money, she would be happy to offer her time to help shop and assist in making all wedding arrangements. "I went with her almost every weekend," Kate recalls. "Along with getting ready for the wedding, we were able to spend time together and talk, which helped rebuild our trust in each other following my divorce."

David Turner, program manager for Salt Lake County Division of Aging, feels that Kate made the right choice in setting boundaries. He also suggests that retired couples reach an agreement by asking themselves, "How can we show a united front if our kids ask for money?" In this way, parents can circumvent a tactic children use—to get one parent alone and get that parent to commit to a request, separating one parent from the judgment of the other. "The triangulation tactic that both young and adult children use can be a pattern that continues into adulthood," says Turner.

He adds, "If parents sets boundaries in little things, it gives them the courage to say no when a child's request is a major imposition. While I’m always willing to help in a crisis, if the request for money is for convenience sake, the negotiated deal has to have some input from both parties," says Turner. "Then too, giving a serious chunk of money to one child may affect more than just the giver and the receiver. The child's siblings may also need to be considered."

Offer Other Forms of Support

Stallings adds that both Day, who turned down her son's car loan request, and Roberts, who set a limit on how much she could pay for her daughter's wedding, made good choices by coming up with alternatives other than giving money. "We can do more than just write checks," says Stallings. “We can do other things that say, 'I love you and I understand you are in a tough situation.’”

She feels that Roberts gave her daughter a clear message and was honest about her own financial situation. "After being estranged from her daughter, she was probably tempted to do whatever it took to re-establish the relationship. Yet she came up with ways of supporting the wedding other than just money." 

Money Gifts Can Contribute to Family Resentment

Adult children who have yet to completely assert their independence may come to parents for financial relief. "This perpetuates the child-parent relationship instead of the adult-adult relationship," says Turner. "From the child's point of view, it's not unusual for the parent to hold that [dependency] over the child for years," says Turner. 

He adds that in the eyes of siblings, the child who asks for money is "often the kid who always creates resentment, who seems to be the real favorite or the real dependent, leaving the parents to justify his behavior." He adds that the other siblings may consider the money gift part of their inheritance and feel resentment when it isn't paid back. "Five years later, when he goes on a big trip, they'll think, 'How come he hasn't paid Mom back yet?’" concludes Turner.

A Gift or a Loan?

Parents can give money to children whenever they want, but they need to understand the consequences of this action, says TantaLisa Clayton, elder law attorney in Salt Lake City. She explains, "If they are going to give money as a gift, and assume that they will never see that money again, they need to ask themselves if that is okay."

If a parent wants the money paid back, he needs to create a written agreement as a contract or promissory note indicating that the money will be repaid (and whether interest is required), Clayton advises. She has seen situations where parents loan money to a son or daughter to buy a house. Then, after the child's marriage was dissolved, the divorce decree granted the house to the child's former spouse. Without a written agreement, there is no hope of recovering any money in such circumstances,” Clayton explains.  She has also seen cases where a parent co-signed on a loan with a child and was liable to make payments when the child defaulted on the loan.

Along with considering a written agreement, she also advises parents who plan to give a monetary gift to first consult with a tax attorney to determine tax consequences and how it will affect their estate plan. "If they plan to give money to one child, they may want to ask how that affects what they want to give to their other children."

Asking questions like these will allow seniors to make the best choice for themselves—and their children.  While giving in to a child’s need is always tempting to a loving parent, practically evaluating each monetary decision (and relying on the advice of experts) can prevent seniors and their families from falling into disagreements over money.