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Financially Speaking

Financial Stress in the Family

Here are some guidelines that might help calm the waters during hard times

Whom do parents give money to more willingly? They're attuned to the youngest adults, such as new graduates, and to children in need — say, those with health or financial problems, according to research led by Karen Fingerman, professor of family studies at Purdue University.

When it comes to emotional support, however, the picture changes. Parents offer more friendship, advice and chat to children they perceive as high-achieving. It's more satisfying to talk with the "good kids" — vivid proof of parenting gone right.

Need aside, the big question is, how much money you can afford to give? It doesn't cost much to have a parent or child move in, if you have the space. But paying out of pocket is another matter. You cannot afford to deplete a retirement account, divert the regular contributions you make to a 401(k) or IRA, or leave a spouse short of money if you die. You won't be doing your kids any favors if either of you goes broke in your older age.

If a request for money comes in, don't say yes or no right away. Think about it, and discuss it frankly with your kids. Here are some guidelines that might help:

College tuition. Don't go into debt for a high-cost "dream school." You have a dream school, too — it's called Secure Old Age U. It offers no scholarships, and no one will help with tuition.

Don't cosign a college loan that you can't afford. What if unemployment strikes and the child can't pay? You are on the hook for every dime. If you cosign a private loan, you have to pay even if the child becomes disabled or dies — something many parents don't know.

Boomerang kids. If kids come home for a stay that will be prolonged, negotiate terms: rent, chores, hours, headphones for music and whether "friends with benefits" are allowed to spend the night. Spouses might also have to negotiate with each other about what the rules should be. Tensions rise when parents aren't on the same page.

Kids' credit card debts. Parents generally dislike rescuing adult children who overspend. On the other hand, you might want to help them out of a hole, especially if they just got out of school, are underemployed and if the interest rate is huge. You might say, "This once and never again." Or "I'll pay half and you do the rest." Or "I can't afford it, but I'll help you work out a budget so that you can pay the debt yourself."

Kids' medical debts. Be proactive about your children's medical insurance. If they're under 26, you can put them on your own group or private policy. If they're older, consider buying them low-premium, high-deductible health insurance. It's risky to leave kids uninsured. If they come down with a serious or chronic disease, you could lose everything paying for care.

Foreclosure. Don't use your income or savings to help your adult child stave off foreclosure. Once a borrower gets six months behind on a mortgage, it's almost impossible to recover. The child may be better off leaving the house and moving on.

Forced support. What about families that are estranged? Twenty-one states have civil "filial support" laws that can force you to help an indigent parent or child, even if you haven't spoken for years. These laws usually aren't enforced but are attracting attention as Medicaid budgets grow tight.

Take Pennsylvania — ground zero for experimentation with forced support. Nursing homes there are using the law to bill adult children for care provided to parents who failed to qualify for Medicaid, says Katherine Pearson, a law professor at Pennsylvania State University.

A harvest of gratitude. Researchers have found a strong tie between giving and receiving: Adults who provide more care to older relatives or children tend to get more from them in return, financially if there's need, or in the form of companionship and care.

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW. Her column, Financially Speaking, will appear monthly in the Bulletin and online.

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