How Much Financial Help Should You Give?

August 18, 2008, January 29, 2009, Reviewed January 29, 2011

"My daughter and her soon-to-be husband want to buy a house immediately after their marriage, but they are not yet settled in their professions and have no savings. What do you think of the idea of my buying the house for them to move into, and selling it to them after they have acquired the means…"

I assume you can afford to do this, but even so I don’t think much of the idea. In my view, it would constitute excessive parental intrusion into a critical area of your daughter’s life, with a major potential for future conflict.

Where they can afford it, I think it is great for parents to provide a helping hand to children who want to become homeowners. But a "helping hand" is not the same as taking over the process, which is what you propose. That is fraught with dangers, not the least of which is that the children never develop the discipline and maturity needed to become successful homeowners on their own.

An example of a helping hand is gifting the couple some of the cash they need for down payment and settlement costs. You do this after you are satisfied that they have a good marriage, adequate income and good credit. If they don’t need the cash but their credit is weak for reasons that you know to be temporary and not in character, a helping hand could consist of co-signing. But read Can Co-Signing Help? What Are the Hazards?

I am a retired young senior (age 65) and I want to help my son and his wife-to-be purchase a house in the SF Bay Area. The bulk of my money is in IRA-type accounts. They could afford the loan payments only if we put 50 per cent down, but I have cash enough for only about half of that. Is buying the house myself, or co-signing, a way to go?”

I think it is a mistake to have your kids tell you what they need, putting you in the position of having to come up with it. This can jeopardize your own retirement and/or enmesh yourself unduly in their lives. You seem to be moving in that direction.

My philosophy, implemented with our own children, is to gift them what we can afford, period. In your case, I would tell your son that I could contribute X dollars (not X percent down) to his house, and the rest is up to him. Not everybody can live in the Bay area.

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