Lending money to family – what to do, and what not to do
(This interview took place on 11 October 2019.)
You should almost never lend money to your family or sign surety on a loan, especially not for your adult children, warns personal finance expert (Galileo Capital) Warren Ingram.
According to a survey by Bankrate.com, about half of adults (46%) who lend money to their adult children never get it back.
Besides, the lending of money also damages relationships between family members, even when the money is repaid.
What not to do
Don’t ever sign surety for a loan on behalf of your adult children. Even if they are going to start a business or buy a business that seems amazing, the risks of failure are always high.
Don’t lend money to adult children to buy a home unless you have a bond on the property.
Don’t hand them your credit card to assist with expenses.
What to do
Any loans that you make to adult children should be done with money that you can afford to lose.
If you are going to lend them a substantial amount, ensure that you have a proper legal agreement done by a lawyer that stipulates amounts, dates, repayment schedules, interest rates, etc.
If you want to help your children, consider donating money to them on an annual basis. You can donate R100 000 per year tax-free.
For more detail, listen to the interview in the audio below.
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This article first appeared on 702 : Lending money to family – what to do, and what not to do
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