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Is the Bank of Mom and Dad still open?

A reader's parents maintain a revolving loan account for the grown kids -- just in case they need some extra money.

By MSN Money Partner Jun 21, 2011 9:37AM

This guest post comes from J. Money at Budgets are Sexy.


Oh yeah, good ol' Bank of Mom and Dad! Love that place. A commenter recently reminded me that I've been wanting to blog about this again, and what she shared about her parents sounded pretty cool. I think I'll even do the same one day.


Here's what "Mrs. O" said:

As long as you keep your credit good (paying them back as agreed, or even better, faster than agreed) it is a 0% loan. . . . They set up a "lend money to the kids account" for each child with a certain amount in it. If you don't pay it back, there is no money left in the account to borrow.

Brilliant! It lets you know there's always money there for you if you need it for whatever, but if you don't play by the rules, you get cut off. Absolutely awesome. I had never heard of this concept before, but I think it really sets you up to learn and manage your money better. Even if you mess up and don't pay it back for a few years, you can always wise up and pay it off later to reactivate your credit line. (I wonder if $2,000 is a good limit?) Post continues after video.

What do you think? In the spirit of all moms and dads out there, give your answer to these five questions:

  1. Is the Bank of Mom and Dad still open to you? (If not, skip to No. 4.)
  2. When was your last loan from them?
  3. What are the payback terms? Or do you secretly hope NOT to pay them back? 
  4. Would you ever loan money to them?
  5. What do you love most about your parents?

I shall go first:

  1. Still open? Yup! If I need 'em. I don't think it'll ever be closed, and there's something comforting in that. Not that I really use their services much anymore. Back in the day, though, I'd always ask them for loans, and then usually never pay them back. I still feel horrible about that. I'd start and then they'd feel bad or wipe the slate clean for good behavior or something. (I did get straight A's growing up, but obviously not in money management.)
  2. Last loan? I was about to say it was like 10 years ago, but then I remembered I took out a loan for a project I was working on a couple years back. (And this time I paid them back in full.)
  3. Payback terms? Anytime they lent me money, we'd go over all the terms up front so we were all on the same page. Whatever amount I needed, we'd divide it by 12 months and I'd pay it off throughout the year, interest-free. The last one was a few G's, and I paid it off early.
  4. Loan to them? Of course! Because of them I was born (and you get to read my blog every day) so I'd do anything in the world for them. Whether I was financially stable or not -- they've done so much for us.
  5. Love most? Their complete and utter love for us. They have never once let us down or allowed us to feel uncared for. It sounds crazy, but there's honestly not one thing I'd change about them. I told a teacher that one day, and she said, "Oh, come on. There's got to be something." Nope. Even when I got in trouble growing up or yelled at them for being the "worst parents ever alive," I knew I was being a little brat. They're incredible parents, and I pray I'm even a fraction of them when it's my turn.

Man, I'm getting all sappy up in here! You never stop and really think about it sometimes, but it feels so good when you do. Anyway, it's your turn now: Is your Bank of Mom and Dad still open?


More on Budgets are Sexy and MSN Money:

Jun 22, 2011 11:12AM
That's the dumbest thing I've ever heard. There's a big difference between being there for your kids because of some unexpected emergency, but being the bank of mom and dad just so they can have some extra money isn't doing them any favors.

You think this is teaching them the value of a dollar? Good for you - if it works. But usually this teaches them nothing more than to live beyond their means because they can just go get the money from the bank of mom & dad.

You're not going to be around forever to loan them that extra money. There's nothing wrong with helping out your kids, but don't you think it's more important for them to learn how to be independent and support themselves?

Never borrowed from my parents, never asked them, for a loan. Irresponsible, good for nothing brother however, was always asking my widowed mother for money. Some people like my brother, need a good swift kick, in the, you no where.
Jun 22, 2011 12:28PM
This shouldn't be for everyday things.  I borrowed $8000 from my parents to buy a car.  I wasn't making that much money at the time and with a 0% loan I was able to pay them back within a year.  And they bailed my brother out when he ran up his credit cards and lost his job.  But they made him pay them back.  Essentially if as a parent you have the money lying around you can help your child buy something that a bank would charge them a lot more for, you should do it.  The worse thing would be to just buy your children everything because they will never learn the value of a dollar.  This won't really teach your kids how to save up to buy something, but it will teach them to responisbly borrow money.  Lets face it, a large percentage of adults age 40-50 right now don't know how to save money, so how are they going to teach their kids how to do it?
Jun 21, 2011 5:45PM
We've made loans to each of our kids (4 of the 5 so far) for purchasing their laptops. They make payments each week and the loan typically lasts for over a year. We choose not to charge interest at our bank of Mom/Dad. Yes, it's a sweet deal, but even so, it's been very effective in teaching the value of a dollar, respect for relatively expensive property, and the implications of being in debt (forgoing other wants due to lost income).
Jun 22, 2011 12:24PM
My parents have been generous enough to help me out with two big loans.  The first was for part of the down payment on a condo I bought several years ago.  I had assumed that eventually I'd pay it back, but when I brought it up they declined, saying it was a gift.  Instead, I have been putting money aside and when it comes time for her to buy her first place, I hope to be able to gift my younger sister the same amount I was given.  

The second was last year when I bought a new (to me) car.  Instead of getting a loan from a traditional source, I took a loan for the amount of the car from them.  I pay a low interest rate and we have a repayment schedule but as my Dad has said, if I get into trouble and miss a payment he's not going to come and take the car back!  I'm actually trying to pay it off faster that we agreed upon.

I know not everyone's parents are in the position to help like mine have, so I feel lucky for what they've been able to do.  I am incredibly grateful to them for not only the loans, but also the money management skills they began teaching me at a very young age.  Thanks to that, I am about to leave my 20s not having amassed huge credit card debt and without knowing the pain of living paycheck to paycheck, things many of my peers know all too much about. 
Jun 22, 2011 2:03PM

Never asked for a loan, completely independent from the age of 17 on. 


Kids are too dependent on their parents these days, in the end it doesn't help the kids one bit.

Jun 22, 2011 2:13PM
Open?   Nope.
Last Loan?   About $200 two years ago
Payback Terms?  100% negotiable. We figure how much can be payed back, time, amount, interest, how bonuses from work factor into the time frame, etc
Loan to them?    No. There is a rather large outstanding loan to them, and there is some bad blood there. Circumstances would have to be pretty horrible for me to even consider it. Besides, they can bum off of my brother every once in a while too. Spread the love!

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