Loan to Daughter

[sengsational]

Quote:

Originally Posted by pb4uski It is fine for you and DW to help her plan and guide her and all, but she needs to do it on her own. She should probably put her credit cards aside for a while.

I wonder how many here have raised children and encountered this kind of problem. I look at it as an opportunity for training...a teachable moment. The method I would choose would change, depending on how long the child had been out on their own. We do often throw them in the deep end without swimming lessons. If I'm convinced that I've done all I can to impart the life skills required to stay out of trouble, then it would turn into a sink or swim situation. But for someone I desperately want to succeed and who is encountering life on their own for the first time, I want to train them. But I'm a believer in "you can't tell 'em anything", so certainly let them work through each activity themselves. But with some patient guidance from someone (maybe a practitioner or a parent). If the behavior doesn't change, then letting them crash is an option. And they should know that going in. They have to know it's not another line of credit, it's a one time effort to get them on track. If it doesn't work, the discussion will be different next time. As to the brokerage account, I presume it was gifted and I'm such a strong believer in the benefits of compounding, that I'd choose to protect it, at least in "round 1". I'd look to emerge from round 1 with the brokerage account intact, and a daughter who learned from her experience. If round 1 ends badly, she would know that next time, she would be on her own to assemble a solution.

[badatmath]

When I was a small child I asked for an advance on my allowance - like $1 or something. My parents told me to learn to budget - I never asked again. Don't enable her.

[willing2try]

I agree with those who say you are enabling her. The only thing she's learned is that if she's willing to have a tearful phone call, you'll bail her out.

[pb4uski]

OP, is her $26k brokerage account accessible without penalty.... ie, a taxable account? If so, then I like the idea of her "borrowing" and paying back her brokerage account rather than you... make it all more real for her.

If it is a Roth then she could withdraw contributions... again, more real.

If it is a tIRA then the 10% penalty comes into play... it still might be worth her having to pay penalty and tax... a valuable lesson to her not to get herself in a jamb like this again.

I recall when I was in my late 20s I ran up $3k in credit card debt and it took me a long time to pay it off... a very valuable lesson that was never repeated.

P.S. We have a similar arrangement with DS... even though he is financially independent and doing well (a saver only because he isn't a spender) he still relies on me to manage is investments for him... though we talk about any significant moves. While he knows that money is there and is "his" since in his case it is "for retirement" he doesn't consider it in his day-to-day finances.

[OldShooter]

Quote:

Originally Posted by pb4uski Sorry to be harsh, but WADR, you're enabling her. ...

This.

[jkern]

I don't have all the answers, but I think the most important thing is to control or break the shopping/spending addiction. Whether you loan her money or not, or she blows through the $26K or not is incidental to her shopping addiction.

I know a 78 year old women with a spending/gambling problem that she never resolved. She's bankrupt and broke. Her kids pay her rent and provide her with transportation. All the hard lessons never worked. Not coincidentally, her daughter (50's) had spending/shopping issues her whole life and lost almost everything. She has more control now, but that will never get her house back.

[gauss]

Possible candidate for a Dave Ramsey program? She might accept the advice more from and independent third party than the family member who is the owner of the piggy bank.

If she turns her ways around, in a significant manner, at a young age, it could be life changing.

-gauss

[mitchjav]

Quote:

Originally Posted by wrigley The first thing that caught my eye was "We helped her plan for this move, setting her up with all the $'s she needed to make it through the summer (with no teaching income)" My son is an elementary school teacher and gets paid all year round. He has a summer job that he starts the day after teachers are finished for the school year, so he actually "double dips" for about 2 1/2 months. Mike

In NJ the teachers get paid on a 10 month schedule. I did show her how to bank a portion during those 10 months to use during the summer - don't think it sunk in. She's typically very good about hustling for those extra assignments and she did some on-line teaching this summer (payroll screw-up - delay in getting paid), but COVID limited her opportunities this summer.

[mitchjav]

Quote:

Originally Posted by Car-Guy Am I reading this right? She is a 24 year old about to start a new teaching job, has 26k in a brokerage account that is her money and needs 5.2k to pay off her current bills? When I was 24 I had more than 26k but that was in debt or negative value. Sure she needs to be disciplined in spending unless/until her boat comes in but she sounds like she's doing okay to me. Unless there's a lot more to this story.

Well - let me clarify - she's going into her 2nd year of permanent job - she did sub replacement jobs for a year before that - so really her third year. Yes, the main problem is spending discipline - if she had direct access to that $26K, fear it would be gone in the blink of an eye.

[mitchjav]

Quote:

Originally Posted by pb4uski Sorry to be harsh, but WADR, you're enabling her. Other than a difficult conversation and night of tears she hasn't learned anything. What does she have for income? Time for her to put her big girl pants on and learn that actions have consequences. She needs to have that difficult conversation with her landlord that she can't pay her September rent and negotiate a payment plan with him/her. She needs to pay that outrageous credit card interest... it will incentivize her to get it paid off. If she needs to dip into her brokerage account, so be it... the payments that she would have made to you she can make to rebuild her brokerage account. It is fine for you and DW to help her plan and guide her and all, but she needs to do it on her own. She should probably put her credit cards aside for a while.

Mostly I agree with you .. although I do feel like this one-time only loan (or bail-out) is appropriate - she'll have to pay it back. If she took it from the brokerage, the money wouldn't find it's way back there...if she fails again, yes, she's on her own...

[O2Bfree]

Quote:

Originally Posted by cargetter100 There's nothing wrong with a tearful phone call from a loved one needing help. But the help shouldn't be in the form of a message which says to her "You are incapable of manainging your life or financial affairs without indefinite extension of parental help/control."

In this case, there is something wrong with the tearful phone call because the parents discussed finances and helped their daughter plan a budget before she moved out. Then she blew it. They should of course maintain a loving and supportive attitude and assure her that she can work through this, but they don't have to cave.

[pb4uski]

Quote:

Originally Posted by mitchjav Well - let me clarify - she's going into her 2nd year of permanent job - she did sub replacement jobs for a year before that - so really her third year. Yes, the main problem is spending discipline - if she had direct access to that $26K, fear it would be gone in the blink of an eye.

That would have been me at her age... if it hit my checking account then it was gone.

What I did was to "pay myself first" saving so the money never hit my checking account. Since my employer didn't have savings withdrawal options, I would take my savings amount out of my paycheck and walk about 1/4 mile to another bank where I had my savings account. I intentionally made it inconvenient so I wouldn't be tempted to raid my savings... and I also intentionally did not have an ATM card for that bank. In my mind, I considered that money sacrosanct.

[pb4uski]

Quote:

Originally Posted by mitchjav Mostly I agree with you .. although I do feel like this one-time only loan (or bail-out) is appropriate - she'll have to pay it back. If she took it from the brokerage, the money wouldn't find it's way back there...if she fails again, yes, she's on her own...

If she can gather the discipline pay you $x per month for the loan then she should equally be able to gather the discipline to transfer $x per month into her brokerage account.... somewhat of a distinction without a difference.... you can monitor her brokerage account to see that her "payments" happen as you have both agreed.

[Souschef]

Quote:

Originally Posted by Sunset I've seen this with my Sister... penniless at over age 60, blew a few inheritances.

I have a cousin,I have mentioned before, who blew through three inheritances , and still has not gotten the message.

[SumDay]

Quote:

Originally Posted by spncity Include a requirement to take the Dave Ramsey course? .

THIS!!!!

Also, when we were buying our first home, we went to the local Consumer Credit Counseling (do they even still exist?) to have them tell us how much we could afford to pay on a mortgage. Very beneficial, FREE, and got us started out right. They gave us great tips for budgeting and sticking to it.

You're a good dad. It's hard to let them flounder, but sometimes those are the best lessons. If she does it again, well, all bets would be off for this mama.

[pb4uski]

Quote:

Originally Posted by cargetter100 ... It is you. You are the problem. Sorry. But you need to hear it.

^^^ I think this is wrong. Her lack of financial discipline is root of the problem... not the OP.... though I concede that the OP's plan is enabling.

[pb4uski]

Quote:

Originally Posted by cargetter100 No. She's an adult. OP should not "monitor" her brokerage account at all. OP is the problem. Look where all his control over his daughter and her finances has ended up. OP needs to disentangle himself from his daughter's financial affairs immediately (if not a year ago when she started her permanent teaching job, or barring that, when she moved into her apartment a few months ago). He wouldn't be throwing her to the wolves. She has a good job, the ability to get side gigs, and $26,000 in savings. She has her own place. OP needs to bow out.

I just totally disgree. OP needs to help but in subtle ways that are not enabling.

You're advocating sink or swim, which is one approach, but not the only approach.

So we'll agree to disagree if you don't like it.

[O2Bfree]

Quote:

Originally Posted by Sunset I've seen this with my Sister... penniless at over age 60, blew a few inheritances.

My brother too, penniless and homeless after decades of our folks bailing him out of various financial and legal scrapes that started in his teens. He hadn't gotten any inheritances but did blow through all the money he made while running and then buying the family business. Fortunately, he didn't run the business into the ground though he did leave the folks with a large debt to various suppliers when he left because he'd been pocketing money instead of paying bills. When he showed up at our doorstep a few years later looking for beer, money, and a place to crash I gently said no, no, and no. Lucky for him his daughter shipped him back to where she lives and set him up with a place to live and someone in social services to manage his SSI check. He and I still communicate, but I'll never trust him nor give him money.

[Gumby]

Quote:

Originally Posted by mitchjav In NJ the teachers get paid on a 10 month schedule. I did show her how to bank a portion during those 10 months to use during the summer - don't think it sunk in. She's typically very good about hustling for those extra assignments and she did some on-line teaching this summer (payroll screw-up - delay in getting paid), but COVID limited her opportunities this summer.

Is that really the only option or could a call to the payroll office reveal others ?

My young wife retired last year after 30 years of teaching in Connecticut. She had three options for pay - 1) 26 equal pay checks over the full year; 2) 20 equal paychecks during school and no pay over the summer (same as your daughter); or 3) 20 paychecks each equal to 1/26 of hr yearly salary with one check on the last day of school equal to 6/26 of her salary. She chose Option 1, on the belief that an even cash flow over the course of the year would be best. Most teachers took Option 2, especially if they had a separate summer job. A few took Option 3 because they wanted to go on a fancy summer vacation as soon as school ended.

For someone new to managing money, an even cash flow is the best. I would advise her to check with the payroll office to see if she can get 26 checks over the full year.

[Aerides]

*mod note*

discussions of children+money are often contentious, and there's never one right answer. There's also never justification to express hostile judgment another member's parenting practices or advice.

So, let's understand we are going to disagree, but without being disagreeable.