Parents: Stop Bailing Out Your Kids!
By: Brian O'Connell

A new poll says that 40% of U.S. parents claim they have paid off debt on behalf of their adult children. Here’s a deeper look into the survey numbers (from CreditCards.com) and what it means to both parents and children.

First, know that younger Americans are flirting with disaster when it comes to credit card debt. On U.S. college campuses alone, 76% of undergrads have credit cards, with the average balance at $3,173, according to a 2009 study by Sallie Mae called “How Undergraduate Students Use Credit Cards.” According to Sallie Mae, that’s the highest in the years the study has been conducted.

Even when students get out of school and (hopefully) into the job market, the debt burden doesn’t ease. Aside from credit card debt, the average American college graduate has seen their loan debt amount raise by 5% in 2009 alone, as measured by the nonprofit Project on Student Debt. That brings the average student loan debt amount to $22,000, the Project on Student Deb reports.

Completing the perfect storm, younger Americans are among the top of the list in U.S. unemployment lines. According to the U.S. Labor Dept, American youth (up to age 24) have a jobless rate of a whopping 53.4% through September, 2009.

That’s where parents – and their checkbooks – enter the picture. The CreditCards.com survey reveals that two out of five Americans with “adult” children have paid off their kids’ debts, usually in the form of credit cards, car loans, and medical bills.

According to CreditCards.com, which used GfK Roper to run the survey, the poll focused on American families with adult children over 18-years-of-age. In the survey, the most frequently-paid-off debts were:

  • Auto loans (40 percent)
  • Medical debt (37 percent)
  • Utilities (31 percent)
  • Credit cards (30 percent)
  • Student loans (29 percent)
  • Mortgage (11 percent)
  • Other transportation-related bills, such as car repair, gas or tickets (5 percent)
  • Personal loans (4 percent)
  • Other kinds of loans (6 percent)


The good news, as it were, was that American parents drew the line at a lost weekend in Las Vegas. According to the survey, no parent admitted paying off a gambling debt.

The study showed that where you lived, and how close you were to your mother, played big roles in whether an adult child got his or her debts paid off. The survey reports that mothers (33%) were more likely than fathers (26%) to pay off a child’s debt. Parents in the Northeast U.S. (34%) were less likely to help out with a child’s debt while parents in the Midwest (52%) were more likely to cut a check.
If you’re in a similar situation, financial advisors say you need to ask yourself a big question: can you afford to pay off your child’s debts?

If you have little savings, and no pension or big retirement savings fund to fall back on, then you could damage your own financial future if you pay off your child’s car payment or fork over $20,000 to get junior out of credit card debt.

If you have to help out, make sure you tell your child the “gift” is no gift at all – it’s a loan that you expect to be paid back.  But in the end, don’t be afraid to say “no” if that’s what your gut tells you. If you really want to do your child some good, offer to help them find a job so they can pay off their debts.

You’re a parent, true. But nobody ever said you were Bank of America (Stock Quote: BAC).

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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