We have clients who often seek our advice on lending money to adult children or even their parents for various expenses. Here are some strategies you can use when you are faced with the difficult decision to lend or not to a loved one.
1) Get in the habit of saying NO. Often times lending can lead to a broken relationship and empty wallet.
Check out the statistics from a recent money-etiquette survey:
- 57% of people said they have seen a friendship or relationship ruined because one person didn't pay back the other.
- Almost 50% have loaned $100 or more to help out someone, but 55% don't get repaid.
- 71% lend money to immediate family members, 57% to relatives, and 54% to friends.
2) Offer ways to help rather than just lending money. Being a personal banker or ATM to your kids out doesn’t teach them how to be financially independent. Consider helping them set up a budget, paying for a few sessions of therapy for compulsive shopping or signing them up for classes that teach your child how to be financially responsible, such as the Dave Ramsey Financial Peace University, a 9-week course. For older adults, look for alternatives or reductions in their expenses.
3) If you choose to lend….Never give more that you can’t afford to loose. Don’t let your own budget get our of control or put your own retirement in jeopardy. You need to set clear boundaries when you lend money. Draw up a contract, make sure the lendee has a budget and plan (personal or business) for repaying the loan. If you need help creating your own financial plan, please call our office 800-854-0433 to schedule your appointment.
Wishing you a Happy Valentine’s Day from all of us at VWM!
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Dave Ramsey, Vision Wealth Management, Inc. and LPL Financial are not affiliated.