Lending your children money can be a nice gesture. Sometimes parents feel it is their duty to lend money to their children to make their lives easier or just to make them happy. However, lending money can be dangerous if done too often or a big sum is lent for something unimportant.
If parents constantly lend their children money, they will eventually expect it whenever they ask. This can prevent younger children from understanding the value of money when they are older. They will feel they do not need to work hard or save money because there is an expectation that their parents will always give it to them.
Some parents lend money on the provision they will get repaid eventually or other conditions are met. This could work for some families but there is always the risk the loan will not be repaid or the terms will not be adhered to.
Parents are more reluctant to chase payments from their children especially if they believe the money is helping them. On the other hand, relationships can be damaged due to resentment and tension caused by lending agreements not being clear. Therefore it is important to establish if the money being given is a loan or a gift to prevent any issues in the future.
Francis Fabrizi
Accountant
Keirstone Limited
