Because of chronic employment problems your daughter and her husband are struggling for cash you decide to let them live with you until they can recover. The weeks turn into months, turn into years and they never do seem to recover. Your granddaughter needs a cosigner for her student loans. You decide to do it. Your brother is between jobs and needs help with the rent. You do it. Your boyfriend is between jobs and needs help with the mortgage, you do it. Your brother’s marriage is breaking up, his business is in the tank and he asks you for a “loan” of a few thousand dollars to help with the mortgage. Do you do it? Your brother calls needing thousands of dollars in dental work, but he doesn’t have the money. Do you do it? All of these situations are examples of Economic Outpatient Care (EOC), a term coined by Stanley and Danko in their book, The Millionaire Next Door. According to Stanley and Danko EOC refers to the substantial economic gifts and acts of kindness some parents give their adult children and grandchildren. While Stanley and Danko refer to actions of parents when using this term, EOC can occur in any family in which large economic gifts pass from one family member to another.
What is the ultimate impact of EOC? The recipients as a group produce much less than non-recipients and they are much less likely to become economically independent. EOC does not refer to isolated one-time gifts intended to help a person get through a rough patch, but to recurrent and ongoing gifts to family members in perpetual need. Because chronic recipients of EOC tend to remain dependent they tend to drain or consume the resources of the giver attaining a disproportionate share of any inheritance.
How can something intended for good, produce harm? Because simply solving someone’s immediate economic problem does not create the skills that foster independence but what it does do is set the stage for the expectation of ongoing economic assistance. Stanley and Danko found that investing in a child’s education and fostering an environment of independent thought, leadership and personal responsibility actually assists adults in becoming independent.
With this information, how do you decide whether or not to provide assistance to a relative when asked? First ask yourself if the person asking is chronically in need. If so, your gift may not have the positive effect you intend. Painful as it is, it may be better to decline to help. It is not clear that giving the assistance in the form of a loan produces better results therefore, to ensure peace in the family, it may be wise to give assistance as a loan only if you will need the money back at some future date. Second, can you afford to lose the money? If you are thinking of assisting someone with money you cannot afford to lose, you should decline to help. Third, if you decide to help, set a limit on your assistance by limiting the dollar amount or the total number of times you intend to help.
It is hard to see the people we love in trouble and it is hard not to want to help. I have certainly benefited from parental support as a young adult and am grateful for it, but there comes a time when we have to grow up and live independently of our parents, grandparents, sisters and brothers.
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