I’m currently teaching my 4 yr old daughter Ollie how to ride her bike, without the use of training wheels. Every weekend, we head to the park in front of our house, and begin the same process we started several months ago. At this point, you’ve just learned something about me. I don’t want my daughter to fall off of her bike. As I stand behind her holding the seat, all I can think about is the fact that I’m the only thing standing between her wellness and the bloody knee she will get when she falls. I wasn’t a criminology major in college, but I don’t think you can push a little girl down and cause her to bleed. I’m pretty sure it’s a crime. I’ve yet to let go of her seat.
Yet, when I’m out about town, I’ve never seen an adult riding a bicycle with training wheels. Why? Because I’m doing it wrong. I’m hurting my daughter by not letting her get hurt. You can try to tell me I’m wrong about this, but I’m not. Unless she falls off that bike, then she’ll never learn to ride it. I fell off my bike. You fell of your bike. She must fall of her bike.
We help our families, even when we shouldn’t, because we are trying to lessen their pain. Sadly, we rarely lessen their pain, when it’s all said and done. Instead, we spend years slowly tearing the band aid off. And the crazy boomerang thing about it all is that we also end up hurting ourselves. In my recent book, Mock Retirement, I discuss how the increased financial assistance to adult children has ended up devastating baby boomers’ retirements.
So what does “doing stupid financial things for our families” look like?
- Giving down payment assistance to children
- Paying for your adult children’s cell phone, car insurance, or other monthly bills
- Assuming your children’s student loan payment obligations
- Paying off any of your children’s debts
There’s lots of reasons why we do things like this. Frankly, it’s pretty damn easy to justify “helping” family. But my assertion is that none of these things really help our family members. Here is a non sequitur list of reasons why people do these things, that I’ve personally witnessed
- Guilt
- Charitable desires
- Overconfidence in own financial situation
- Overconfidence in others’ financial situation
- Pride
- Mental illness
- So the borrower’s failure doesn’t reflect poorly on the giver
- Stupidity
- Societal pressures
- To make things “easier”
My least/most favorite story in this regard happened about 9 years ago. A firefighter at a local firehouse was pleased to welcome his son onto his engine company. This was a proud moment for this dad. For years he had wanted his son to get into the family business. About six months into the new gig, the son asked his dad to help him payoff his $6,000 of credit card debt. The father, full of pride, but not full of money, decided to give his son the money. The father called this money a loan; the son called it something else. His son paid off the debt, and immediately became financially stress-free.
About three months later, the son showed up to the firehouse in a brand new pickup truck. It was a $36,000 truck, with a $580/month payment. In essence, the father’s willingness to pay off his son’s debt, was rewarded with his son buying a $36,000 truck. The father was understandably upset. Things got worse when the father was hit with an unexpected medical bill for about $10,000, just two months later. Meanwhile, the son was already racking-up more credit card debt. The $6,000 loan/gift/whatever was the worst decision for everyone involved. More money never helps the unresourceful.
When a family member comes to you with a money problem, stop and breathe. Your parental instincts generally kick in, and you are immediately inspired to do whatever you can to remove the pain. Sometimes you shouldn’t try to prevent the pain. Your family member might just need to fall off his/her bike.
There are always exception to this quasi-rule. There will be obvious situations in which loaning/gifting money to someone in trouble is a good idea. If you have the means, have at it. Hold onto that bicycle seat. But if money doesn’t solve the problem permanently, then let go.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
I mostly agree with what you’re saying, Pete, but would like to point out that not all financial gifts from family members are equal. For example, my mother inherited money from her father and also receives money through her family’s farming corporation. Rather than hoard it, she set aside what she needs to retire comfortably, and each year she gives a portion to my brother and I, with the stipulation that we invest most of it. She knows we don’t make much money to be able to contribute as much as we’d like to retirement planning, so she’s helping us out. Her financial situation is secure, and she’s improving ours as well. It’s made my brother and I MORE responsible with our money, more determined to save, and more knowledgeable about investing.
Well said Pete! With family – giving them money is a ‘gift’, not a loan. Family members are the last on the list for repayment, and generosity is quickly forgotten unfortunately. It’s a sad truth. It adds to the enabling of bad money decisions and not being held accountable to these bad money purchases/decisions.