Like many of you, I’m looking forward to spending time and catching up with family members I haven’t seen very often during the year. With all the disastrous world events and the never-dull political season heating up, I’m certain there will be some interesting conversations, not just at my house, but also across the nation.
It seems like every January I receive a phone call from a client who
learned over the holidays that their son or daughter was having some
sort of financial issue. They want to discuss dipping into their nest
egg to help out their loved ones.
For the most part, I have no problem with this. After all, family is
family. And if you’ve been fortunate enough and are financially
comfortable in retirement, I certainly understand why you would want to
help family members.
However, I think it’s important to put defined parameters on the
financial assistance. If you don’t, experience leads me to believe that
misunderstandings over money can result in fractured family relations.
I miss my late father a great deal, but he imparted to me a piece of
advice I will always treasure. He was adamant that he never wanted our
family to have disagreements over money.
As a financial adviser I’ve witnessed many financial arguments among
family members. I’ve seen long-time family businesses break up because
the kids running the inherited company disagreed over money issues.
Often to the point that the children totally disassembled the family
business their parents had built.
You might not own a business, but when a family member corners you
during the holiday and asks for financial help, you probably will if
you’re able. That being said, if you do help a son, daughter or other
family member, it’s important to have your money, your heart and your
documents in order.
For example, I’ve had some clients complain to me months later that
their loan wasn’t being repaid. When I ask if the recipient knew it was a
loan and not a gift, the typical response is, “I thought they did.”
The lesson is clear. When money is involved, make certain both
parties understand exactly what’s expected. If it’s a gift, make clear
it’s a gift. If it’s a loan, I suggest an amortization table, and a
signature acknowledging the loan.
I know. You might think giving a loved one a loan table and asking
for a signature is cold and unnecessary. As a seasoned financial
adviser, however, I’ve witnessed more than one family splintering over
money issues. Defining the financial assistance will minimize potential
My hope is that you will enjoy the warmth and beauty of the season
free of financial concerns. But if they do arise, don’t just pull out
your checkbook. Find out what created the problem. After all, if someone
asks you for money, you should be allowed to ask questions.
A little due diligence might enable you to get to the cause of the
financial problem and maybe even find a way to solve it. As a concerned
parent, you don’t want to throw money at a reoccurring issue. You want
the issue resolved for the long term.
In the meantime, I want to wish all my clients, readers and their families a Merry Christmas.