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Should I lend Money to my Children?

It can be a big dilemma when you are a parent and you are not sure whether you should lend your children money or not. Situations can all be very different and many parents may just not have the money to lend and some children may never need extra money. However, there may be a time, as a parent that your child does ask for money and you will need to think about how to deal with it.

Do you have the money?

Obviously the first thing that you will need to think about is whether you have the money to lend them. You may feel that you really need to help them out as they are your child and so you should do everything that you can to help them. It may put you in a difficult situation though. If you have to sell things to provide the money or go without yourself, it could make things tight for you. Make sure that you will not need the money yourself. Think about the sorts of things that you might need to buy and whether you should keep some money back so that you can afford those things. You may be wise not to use up all of your savings, just in case you do not get the money back or in case you need it before it is paid back.

How will they pay you back?

You need to have a think about how they will pay you back. It might be wise to have a formal agreement so that you do not have any chance of falling out over the repayments. You could think about the amount that they could afford to repay and so it could just be a small amount but if they were at least paying something regularly, you would have more chance of getting the money back. You will also need to agree with them whether they will pay you any interest on the money that they have borrowed. This might initially seem rather unfair but if the money was in the bank the parent would be getting interest, so maybe the child should repay that, which could still a lot cheaper than the costs of a loan.

How will their siblings feel?

If you have more than one child, then it is important to think about what their siblings might think about you lending the money. They might I is unfair and they might even want some for themselves and ask you for some. This could be a problem if you do not have enough money to lend to all of your children. It may affect your relationship with those other children. They may also get jealous of each other and it could affect their relationship with one another as well. Some people do tend to get jealous and others do not, it can be down to whether they are used to being treated the same and so if one suddenly gets treated differently this can cause jealously. It may be that they just have a jealous personality and you are likely to be aware of this and should make sure that it does not become a problem.

Will you manage financially if they cannot pay?

It is worth imagining what might happen if they cannot pay you the money back. It might be that their financial situation gets worse and worse and they have nothing to repay you with. This is something you need to imagine, even if you do not think that it will happen. This is because you need to ensure that you will be able to manage financially even if you are not getting any repayments on that loan. It can be hard to know for sure, but think about things that you may need to buy in the future and whether you think that you will have enough money to be able to afford them.

What will you do if they cannot pay?

If they miss a repayment or say that they will never be able to repay the loan, how will you manage? It is worth not only thinking about how you will manage financially but also how you will feel towards your child if they did that. It might be that you will be happy to help them out and not mind at all, however, you might find that you start to resent them, particularly if you wish that you had the money for some reason. You may also need to consider whether you need to even things out with your other children, if you have any. If you write off a loan for one then will you need to give the same money to your other children to make it even and will you have enough money to be able to do this?

Is it Right to Borrow Money for a Family Holiday?

Many people like to take their family away on holiday regularly. This can be a great opportunity to get to know each other better, be more relaxed and have a break from work , school and life in general. It can also be fun to do different things and explore new places. However, a lot of holidays cost lots of money and many families cannot afford to go on holiday unless they borrow the money. But is borrowing for a luxury like this something that should be done?

Look for alternatives

Before you borrow money for a holiday it is wise to see whether you have any alternatives. See whether you have any money in a savings account that you could use to pay for it, for example. Perhaps you have some money that you had forgotten about, you can sell something to make money or you can save up. If the holiday is not needed immediately, then you could save up some money each month so that you will not have to pay for it all in one go. It is worth calculating how much you can save each month and working out whether that will be enough to pay for the sort of holiday that you would like to have.

Keep it cheap

It is a good idea to keep the holiday as cheap as you can. If you can avoid borrowing by keeping it cheap this will be good, but even if you are borrowing, by keeping it cheap you will not have to borrow as much. There are different ways that you can keep the price down. Travelling off season always helps and even if you have to go in school holidays, going at half-term or Easter rather than the summer can be quite a lot cheaper. Also the type of place you decide to stay in will make a difference with hotels being more expensive than self-catering places and camping being cheaper than cottages. Think of the location too, with the further you have to travel the more expensive travel costs are likely to be. The form of transport that you use will also have an impact on the cost.

Is it worth borrowing?

You need to consider whether the benefits of the holiday outweigh the disadvantages of a loan. Think about the overall cost of the loan, how easy it will be to make the repayments each month and whether the debt will stress you out. Also consider the effect it might have on your credit rating and whether it pay prevent you from getting future loans that you might need more urgently. You will need to then think about what benefits you get from the holiday such as the family time and the relaxation. If you come back to worrying about debts it may be that the relaxation may soon be forgotten so you need to think carefully.

Find the best priced loan

If you do decide to borrow then do your best to keep the prices down by getting the best priced loan. Compare the different types of loans to see which looks like it will be the best one to suit your needs. Then compare the prices to get the one that will provide you with the best value for money. Note that the cheapest may not be the best, but you do not want to pay significantly more than you have to. Consider how large the repayments are, for example, and think about whether they will be manageable for you. Think about the length of the loan and whether you will be happy to be making repayments for that long. Also consider whether the lender is one that you will be happy to go with. You may be interested in a flexible loan that you will be able to repay early if you can. If so then you will need to look carefully to see whether the loan that you get has this option and whether this makes it more expensive. Look at any one off fees for repaying it early as well as comparing the interest rates.

There are a lot of things to consider but it is well worth taking some time to make a decision. This is an important decision and it could have a big impact on you in the short term as well as the long term. It is something that you should discuss with the family so that you make sure that everyone is happy with the decision. Ensure they all understand the consequences of the decision and the steps you can take to make the holiday more affordable, such as delaying it until you have saved it. It can be much easier making this decision with the agreement of others rather than having to do it by yourself.