At 26, Bill Reed already had a pretty good credit history with his parents.
And so when the Kennesaw State grad lost his graphic design job two years ago and needed a place to stay, Mom and Dad happily opened up their basement to him. When he hit them up for loans to make needed repairs to his car, first for $900, then $400, they didn’t hesitate.
“They know I’m good for it,” said Reed.
If the current economy underscores that “you can go home again,” as some say, you can bet changing family dynamics aren’t too far behind.
“Boomerang has new meaning,” said Susan Newman, a social psychologist and author of “Under One Roof: All Grown up and (Re)learning to Live Together Happily” (Lyons Press, 2010). “It’s not just the 80-plus percent of college students returning home, but it’s parents, adult children with children and siblings.”
With the economy still sputtering and credit a lot harder to come by, the number of people needing financial help and even the number of families joining forces under one roof will likely increase before things get better.
“Family is the first line of defense in a bad economy,” said Lori Brown, associate professor of sociology at Meredith College in Raleigh, N.C.
But how that defense is doled out can have a lasting impact on both the giver and the receiver of that help, especially if it comes in the form of a loan.
Indeed, depending on who you talk to, loans to family members should never be given. And when they are, people should be careful to set deadlines for repayment. And even then, experts say, payment should not be expected.
“In an individualistic society like ours, loans among family members are very difficult,” Brown said. “Family members should only loan money with the knowledge it is not expected to be repaid. And once gone, it needs to be gone as a topic.”
Paying back
Reed was still in high school when he took his first loan from his parents, Mark and Michelle Reed, who are retired and living in Dawsonville.
Instead of getting a bank loan to purchase his first car, Mark Reed agreed to purchase the vehicle outright so his son could avoid paying a high interest rate.
“I paid him back over five years,” Bill Reed said.
When he needed to make repairs on that car recently, Mark Reed again made the loan to his son.
“Pay us when you can,” he told him.
Although his son has yet to make a payment on the loan, Mark Reed is confident he’ll make good on it as soon as he’s able to find a job.
For now, Bill Reed said, he does what he can to help around the house, including cooking meals.
Patricia Baisden, an Army master sergeant serving in Afghanistan, said she has loaned $100 to her sister, $1,000 to her oldest son and about $2,000 to her youngest just in the last eight months because they either lost their jobs or their hours were cut.
Her sister repaid her loan before it was due, Baisden said in response to a Facebook query. And her oldest son has about 70 days left before full payment on his loan is due.
“As far as my youngest son I just write that off because I know he will never pay it back because his paycheck is just too small,” wrote Baisden.
While the Fairburn resident admits their timing is always bad, she said the loans have not posed a hardship for her.
“I do my best to help those in need because I know that God will provide all my needs and the desires of my heart will be granted,” Baisden said.
Relationships strained
More often than not, sociologists say, money troubles can rip families asunder.
“We know that bad economic times usually result in divorce or at least separations and increased violence, especially with long periods of unemployment and financial pressures,” Brown said.
She noted, however, that in other cultures with fewer government services, poor families, in particular, create networks within their families or look to other sources such as godparents for help.
Since the down economy seems here to stay, Brown said, this might be a good time for extended families to pool their resources and help each other, not only in living together but helping to pay for college, medical care, child care and finding employment.
“This could have a beneficial effect in bringing these families together,” she said. “Addressing these problems as a group rather than an individual has excellent physical and mental health advantages.”
Still, a family member may decide he or she simply can’t loan money to a relative.
Brown said that if a loan isn’t possible, there are other ways to help, such as volunteering to help with child care while someone looks for a job or buying a college student’s books.
“I think people forget there are things we can do for people that don’t require money,” she said.
Even though family members have a responsibility to help each other in all sorts of ways, including financial, Brown said it’s very hard for Americans, especially middle-class Americans, to understand the idea of willingly helping and not expecting much in return.
“Those who are comfortable now need to step up and help those who aren’t, without judgments about their character,” Brown said. “Most of the problems people have today are structural in nature. It isn’t due to personal failings but changes they had no control over.”
Last in, first out
Such was the case for both Baisden’s oldest son and Bill Reed. They each were laid off.
When Lockheed started cutting back in 2009, Bill Reed said, “I was the last one in and the first one out.”
Even though he had six years of design experience, Reed found himself in competition with more experienced workers. Six months passed and he’d burned through his savings.
“I took a leap and asked my parents if I could move back home,” he said. “Thank goodness they said yes. But if you’d told me I’d be 26 years old and living in my parents’ basement, I would’ve said you’re crazy.”
Mark Reed had only one stipulation for his son: “Be looking for a job, don’t get stuck in a rut.”
So far that hasn’t happened. While still putting in applications, Bill Reed is doing freelance for two design companies, hoping one will turn into a full-time job.
For now it’s enough, he said, to pay his phone bill, car insurance and the website he uses to drum up business.
As for paying on the loans from his father, not yet.
“I’m just hoping I don’t have to borrow any more,” he said.
Experts’ tips for making loans
● Document your loan in writing
● Establish a payback schedule
● Sign it in the presence of a witness
● Keep a record of every payment with a receipt
Source: bankrate.com
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