You may still remember them as little innocents, entirely dependent on you for food, shelter and security, but if you’re the parent of a grown up, then you’ll know just how quickly this can change. If you’ve got children who are aged 18 or over, then it’s likely that they’ll be mostly or wholly financially independent from you by now. Whether they’re employed, at university or doing something else, it’s likely that there may have been a few hiccups along the way as they learned to take care of their money properly. Even those who had guidance and education about money matters while they were growing up may still have had teething problems, as sticking to a budget is harder than it looks.
Unfortunately, whether they’re ready for it or not, once someone turns 18 they’re ‘fair game’ to the banks and other financial institutions. They may get pushed to sign up for a credit card, especially if they’re going off to university. Unfortunately, with the ease in which credit can be obtained (particularly from some payday lenders) it could be argued that young adults are more at risk of getting into troublesome debt than ever before.
So what should you do if your child has found themselves in financial difficulty? Some would tell you to leave them to sort it out on their own, and while this may be the best option for some, it’s only natural to want to look after your offspring. Helping them out doesn’t have to mean giving them the cash to make it all better – giving them the skills to manage their money so that it doesn’t happen again can be just as useful.
Find the Root Cause
Get them to think about the cause of their problem; did they simply get their sums wrong? Did they not fully understand how a particular line of credit worked? Were they just reckless, and if so, did they understand how much a bad credit history can affect their future? As much as they might not want to talk about it, and although you may be angry with them, try to work out what the underlying reason is for their money issue.
Once you’ve both reached a conclusion about why this has happened, lessons will need to be learned. If you have the money to bail them out and you really think it’s the best thing to do, then by all means do so. This, however, will not be possible in every situation, nor can it be the best thing for everyone. How can your child learn a lesson from their mistake if they don’t work to rectify it themselves?
Sit down with them and go through their budget together. Guide them rather than lecture them, and try to keep emotions out of the picture. If they need to make cut backs, show them how and where they can do this for the best returns. You may have different ideas as to what is essential, so try to be patient and let them have their say – if you take control of their budget completely, then they’re less likely to stick to it. It must work for them and their situation.
Consider a Guarantor Loan
If your child has got debts which need consolidating, then loaning them the money yourself and agreeing a payback scheme could work well. However, this will not help recover their damaged credit score – only borrowing responsibly can make positive differences to their file. You may want to consider acting as their guarantor for a guarantor loan. This means you’d support their application, agreeing to make any payments which are missed by them. Of course, an affordability check will be undertaken before paying out the loan to ensure that this may only happen in extreme circumstances.
If they really have reached the point of no return, then you may want to direct them towards a debt relief charity. They will be able to give your child the right support and resources to sort out their problems. They’ll still need support – problem debts don’t disappear overnight, so make sure you ask them about their progress on a regular basis.