This is one of those situations parents hope never to face, but unfortunately more and more of us are having to make this difficult choice.  With the push to obtain credit cards for student frequently beginning on college campuses, young people are barraged with marketing pitches and the promise of rewards and an “easy, convenient method” of borrowing money. In this blog post just last week, we discussed that college students are using credit cards more than ever to pay for their education costs, at least that it what data provided by Sallie Mae is showing.

But back to the original topic — your child has racked up more debt than they can handle. Perhaps it was their college tuition, an expenditure they felt they couldn’t live without, a situation brought about by job loss. They have come to you for help… should you provide them with a bailout package?

Those of us that have been fortunate enough to be blessed with the task of parenthood likely believe that our most important role in life is to provide our offspring with the means to create a life that is as good (preferably superior) to our own. But that doesn’t mean kids shouldn’t be allowed to learn some lessons the hard way– in many cases, facing challenges is one of the most effective ways to achieve growth and maturity.

That said, it is still difficult to see our children struggle with credit card (or any type of) debt, knowing the emotional and physical trauma that this type of anxiety and feelings of shame may produce. Before making your decision on whether assistance is justified, consider the following:

Are you even financially able to provide assistance? If you are struggling to maintain your own expenses, then you needn’t go any further in the evaluation process.

Has your child corrected the behavior that put him into this situation? If it appears that he or she has learned their lesson and has implemented some sort of “action” plan to ensure that it will not happen further, providing assistance may be a reasonable thing to do. If they are still flashing multiple credit cards for unnecessary purchases, you will likely waste your time (and money).

Strike up a deal. Suggest that they pay as much as they can each month against the debt, and offer to match their contribution.

Write up a contract. Sit down with your child and draft up an agreement– perhaps in exchange for paying this off in full, they can make payments to you (at a much lower interest rate, or zero %, whatever makes sense) over a reasonable period of time. Of course, you must be prepared for the potential outcome that they never are able or willing to pay the money back.

Gift the money to them. If you decide to declare it a gift, be sure you are under the legal gift amount per IRS regulations, or there will be tax consequences.

Credit card debt is a serious problem in our country, and with unemployment skyrocketing and an unstable economic situation many young people are joining this elusive club at an early age. Parents, how do you feel about approving a bail-out for your children?

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