Lending money to family – what to do, and what not to do
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 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.
Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning:
Despite the huge expense, few medical aids cover members in full when they're hospitalised, leaving them with massive shortfalls.Read More
Not the budgeting type? Certified Financial Planner Paul Roelofse explains the “30/30/40” budgeting without budgeting hack.Read More
How much are you worth? Paul Roelofse, a Certified Financial Planner, gives a template for you to copy and adjust.Read More
The Money Show’s Bruce Whitfield asks Peter Armitage (CEO at Anchor Capital) for his stock picks of the week.Read More
Can you afford to leave South Africa? Certified Financial Planner (CFP) Barry O'Mahony on what to consider before deciding.Read More
Edgar Mafoko (Portfolio Manager at FNB Wealth and Investments) shares his stock picks of the week on The Money Show.Read More
Devin Shutte (Head of Investments at The Robert Group) shares his stock picks of the week with Bruce Whitfield on The Money Show.Read More
Personal finance expert Warren Ingram (Galileo Capital) on how to raise financially free children.Read More
Bruce Whitfield interviews senior Karatbars representatives, a financial advisor and someone who was invited to its conference.Read More