Talking to your adult child about money is harder than talking to a 10-year-old about money.

If the adult child brings up the subject its often because they want to borrow money from you or have you co-sign a loan for them. I strongly recommend that you do not co-sign a loan unless you have the cash available to pay for whatever they are purchasing. If they default on the loan you will be liable to pay it back.

Hopefully you have taught them well about money and finances and even if you didn’t consciously teach them they learned from your examples. If the examples were not good ones, now is your opportunity to set things straight. Studies have shown that most kids learn their money habits from their mothers.

Kids need to learn coping skills. Those coping skills include money skills. If you bailed the kid out when she was 14 because she spent all of her allowance the day you gave it to her or you gave her money and told her not to tell her mother you did not do her a favor. You sent the wrong messages about money. You made it secretive! Kids understand the power of money. He who has it rules! And they know which buttons to push so you’ll give in and bail them out!

Loaning your kid money because they have lost their job or for some catastrophic incident like an earthquake that’s not covered by insurance is a noble thing to do. Loaning your kid money because they have used their credit cards indiscriminately to live beyond their means is not a good habit to get into.

And it can easily become a habit for they know which buttons to push and just what it takes for you to cave in and bring out the checkbook. Remember when they would pull a tantrum in the store and have a meltdown and you would give in. They remember!

If they show up at your door needing another loan its time you suggest that you will pay for them to meet with a credit counselor or a financial planner to help them acquire budgeting skills. None of us want to postpone gratification, but its something we learn we need to do as we grow older. Its part of the long growth passage to adulthood. The best way to help our kids is allowing them to solve their money problems on their own!

If you really feel you need to loan them the money formalize the deal, Virgin Money bought  out Circle Lending , a personal loan management company, offers all of the information you need to set up your loan including what the interest rate should be to pass muster with the IRS. And hopefully with a formal plan in place you will be repaid.

Should you lend money to family and friends? If you are doing very well your family may expect that you help out the less fortunate members, even if the less fortunate are less fortunate because they are financially inept!