BOSTON (CBS) – Should you loan or give your adult kids money? The adult child living at home should find a job no matter how menial so they have their own spending money. They can babysit or mow the neighbor’s lawn. You cannot be expected to provide an allowance to a 25-year-old.

What if your adult child wants a loan to pay off credit card debt? If you are feeling generous, consider gifting them the money or offer to pay for a visit to a credit counselor or a financial planner to help them.

What about a down payment on a house or money to start a business? If you want to loan them the money, only lend them what you can afford to lose. Make sure your current lifestyle would not change dramatically if the loan was never repaid. Often times relatives mentally treat loans from family members different than loans from a bank and there is a much higher default rate.

I would suggest a formal transaction, so put it in writing and charge them interest. You can get some help here either from an attorney or your accountant to help draw up a loan agreement. If it’s a small loan you can find forms and repayment schedules online.

There is a website I found that could also help, Lending Karma. It can help you set up the loan as well as keeping track of payments.

You want to charge an interest rate that is fair. Prime is what banks charge their best customers and currently is 3.25%. If they default on the loan you may be able to write it off, but only if it was a formal agreement and you reported the interest as income.

What if they ask you to co-sign a loan? If they default on that loan, you are responsible for the debt and it could affect your credit score and lifestyle if you are stuck making the payments on their motorcycle.

On Saturday May 17th Dee will be the keynote speaker at The Money Conference which is a FREE one-day event presented by The Office of Massachusetts State Treasury and the Massachusetts Financial Literacy Trust Fund, in conjunction with local cities and community partners to help households build their financial knowledge and improve their financial behavior through quality financial education.

The Money Conference: Financial Empowerment for Individuals & Families

Saturday May 17, 2014
8:30 am – 3:00 pm

Everett High School
100 Elm Street
Everett, MA 02149

Questions? Contact Sheila O’Loughlin at (617) 367-6900.

Do you feel your need for financial education and empowerment is urgent? You are not alone! Americans are saving less, spending more and carrying credit card debt over from month-to-month, suggesting that the painful financial lessons of the recent past may quickly be forgotten.


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