Loan to Daughter

[nhcycling]

This is going to sound harsh. You need to stop stepping in and let her figure it out on her own, it’s the only way she’ll be an adult. She’ll either continue to drown in debt or get herself out of the bind, it’s not your job. You can maybe point her to some financial advise but that’s it. It sounds like you are enabling.

[BeanCounter62]

Loaning her money at 1% while her brokerage account sits untapped (and maybe earning more?) is not far off from those of us who have low rate mortgages not paid off since the investments are earning more.

How about if you loan her the money at the credit card rates (18%) and tell her

1) if it's not paid back on time, she will have to repay it - including interest - from the brokerage account (as if she had had to pay off the cc bills by herself - no bail out, just keeping the $$ in house)

2) *IF* she manages to pay it all back on time, you ADD the interest (less your original 1%) INTO the BROKERAGE.

This way she might get a feel for how much more money she has by NOT going into Credit Card debt.

[Octogirl]

My sympathy to you that DD has spending issues that impair her independence. There is no right answer because none of us know your DD and your relationship.
So while I agree that "tough love" is needed, she really needs to deal with her spending habits. I suspect she may need to mature in her thinking and therapy may get at the root.

My youngest son was "slow to mature"with money and deals with chronic depression. As his mom, it was often hard to watch him learn life lessons the hard way.

[blueskyk]

This discussion brings to mind my own leaving home to be on my own. Here were the rules (I came from modest means):

1. We will pay for a college education at an instate public university
2. You would be wise to select a course of study that will support your desired lifestyle (I wanted art, Dad suggested engineering instead and I could do art “on your own time”)
3. You are an adult - our money is not your money. If you find yourself in an emergency, we’ll be there and we will always welcome you back home. Overspending is not an emergency, that one is something you do over time and you can see coming.
4. If you need us to loan you money (for a non-emergency situation) we will review the situation with you and document any agreement we MAY come to with a payment schedule. It will be uncomfortable.
5. Save for your retirement. We’re doing the same - you may not inherit anything from us but you will not have to support us financially - that is our gift to you.
6. You’re smart and capable and have what you need to succeed. We’re proud you’re making it on your own, no matter how modest.

It may sound harsh but looking back it was a great foundation. Sort of like Columbus burning the ships upon landing at the new world. I’m not saying this is appropriate action for the OP, just rounding out the discussion with a different perspective on launching from home.

All four of us kids started out in dubious neighborhoods, then found roommates to move up, got in financial trouble, worked multiple jobs to get out, drove beater cars and scooped up furniture sitting on curbs with “Free” signs, shopped at thrift stores for clothes. And, eventually, we found our footing and did well.

Again, let me be clear, it’s not for everyone but as a kid leaving home, you knew it was up to you and that made a huge difference. YMMV

[Gumby]

Good post. Only one nit - it was Hernán Cortés burning the ships at Veracuz, Mexico in 1519, at the start of his campaign to conquer the Aztec Empire.

[blueskyk]

Aarrgghh - I KNEW I should hav looked it up![emoji38]

[nvestysly]

Quote:

Originally Posted by blueskyk This discussion brings to mind my own leaving home to be on my own. Here were the rules (I came from modest means): 1. We will pay for a college education at an instate public university 2. You would be wise to select a course of study that will support your desired lifestyle (I wanted art, Dad suggested engineering instead and I could do art “on your own time”) 3. You are an adult - our money is not your money. If you find yourself in an emergency, we’ll be there and we will always welcome you back home. Overspending is not an emergency, that one is something you do over time and you can see coming. 4. If you need us to loan you money (for a non-emergency situation) we will review the situation with you and document any agreement we MAY come to with a payment schedule. It will be uncomfortable. 5. Save for your retirement. We’re doing the same - you may not inherit anything from us but you will not have to support us financially - that is our gift to you. 6. You’re smart and capable and have what you need to succeed. We’re proud you’re making it on your own, no matter how modest. It may sound harsh but looking back it was a great foundation. Sort of like Columbus burning the ships upon landing at the new world. I’m not saying this is appropriate action for the OP, just rounding out the discussion with a different perspective on launching from home. All four of us kids started out in dubious neighborhoods, then found roommates to move up, got in financial trouble, worked multiple jobs to get out, drove beater cars and scooped up furniture sitting on curbs with “Free” signs, shopped at thrift stores for clothes. And, eventually, we found our footing and did well. Again, let me be clear, it’s not for everyone but as a kid leaving home, you knew it was up to you and that made a huge difference. YMMV

My experience has many similarities. The rules may not have been as well defined for me but the implication was the same. I am the youngest of many children so the rules were defined by actions of how my siblings were treated. It was obvious there wouldn't be a bailout.

Back to the OP, I cringed when I read the comment about helping plan for the initial move out of the house. That just doesn't seem like the best way to proceed but that's water under the bridge now.

The OP seems to have a reasonable plan going forward in my mind. Help with this initial problem and make it clear how things will work in the future.

Dave Ramsey may very well be a good approach. I like him and think he's provided valuable insight to many. If the DD is interested in more of a self-help approach, one of my favorites is Your Money Or Your Life by Joe Dominguez and Vicki Robin.

Finances are difficult for many people to deal with. DD in this case knows that to an extent and the OP governs the $25k savings.

[roadtripper]

I feel for you, OP. When our daughter went to college, she had 10K in savings from birthdays and other gifts over the years. She also contributed to her savings by working. By the end of her freshman year, it was all gone: not towards tuition (she had a scholarship) but to Wawa, Dunkins, dinners out, etc. What a colossal waste. We told her we'd never send her spending money, so she worked several jobs over the next 3 years to get spending money. Because of her scholarship, we told her we'd pay off her student loans for every year that she didn't ask us for money. She went 1 out of 4.

After graduation, she moved to New York City, lived with a very wealthy friend, and ran up a bunch of credit cards before she got a good job. COVID has actually been a blessing for her: she still has her job, but she moved in with friends out of the city and had no more 15 dollar cocktails to buy or dinners out. As a result, she's been putting extra payments to her student loans.

Just the other day, she told me that she's out of credit card debt. She'll be 26 in a few weeks. I think her desire to prove that she could do it became more important to her than living like her wealthy friends.

I could never understand how she got into her situation in the first place, since my husband and I don't care what others think and spent years teaching her how to manage money. Despite wanting to bail her out, we let her flounder. Now she celebrates every credit rating increase because she did it on her own.

Have your daughter check out VIPKid: it's online tutoring to teach kids in China how to speak English. She might make some extra cash that way.

IMHO, it has to hurt a little for her to get the message, so I agree with the posters who suggested paying her Sept rent but not the credit cards. Best of luck!

[Sue J]

Parenting can be hard!

Our younger son was self employed from age 20 to 31. He never had a credit card and lived cheap. Not a big spender at all. In the early years we did a few short term loans for emergency car repairs or Fed taxes when he was waiting to get paid from gigs. It was always a signed note. He always repaid as soon as possible. Haven’t needed to do this for a long time.

We would not loan money again. Young adults need the dignity of living with their decisions.

[Doribe]

Wow. I would let her take a hard fall, the sooner the better. Let her blow all of her money and when she can't pay her bills, she files for bankruptcy. She will have seven years to learn how to live within her means, if you let her.

[mystang52]

Quote:

Originally Posted by Gumby 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.

DW is a recently retired NJ teacher. We put aside a set amount from each paycheck for the summer cashflow [I'm a neurotic/obsessive? budgeter]. But she had the option of getting 24 paychecks vs 20. She would talk herself blue to some of her colleagues about using the 24 pay option, whenever they complained about their financial struggles over the summer, even though she likely convinced maybe 1. This 24 pay option is clearly Step 1 for OP's daughter.

[Doribe]

Quote:

Originally Posted by Rustic23 No she doesn't! and that is exactly what happened to us. NEVER LEND FRIENDS AND FAMILY MONEY! It is the quickest way to loose both. Give it to her, don't lend it. If she says she will pay it back, tell her that would be nice but not necessary. I speak from personal experience. When she was 'unable to repay' it caused a riff. I told her to forget it, it was a gift, and if she ask again it would be a gift. If you can't afford to give it to her, you can not afford to lend it to her.

100% agree. I give friends and relatives money, not loans. Sometimes they repay me, mostly they don't.

[travelover]

This topic surfaces here occasionally. My view is that money management problems are mental health problems, especially for older adults. Paying money to alleviate the problem is a temporary solution but does not get at the root of the problem. Spending money you don't have is self destructive behavior and the question to be answered is why is this behavior going on.

[SpinDoctorTX]

OP Mitch, I feel your pain. We've been on the giving end of several bail-outs with family members. They were all gifts with no expectation of re-payment. When I retired, though, the gifts ended. Several requests for help were answered, "no- we cannot help this time, but we'll help with thinking up a solution.". There have been no second requests.

Quote:

Originally Posted by 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.

DH once asked his Dad if he would buy him a car, then take payments out of his future allowance to pay it back. That didn't happen!

[target2019]

https://www.salary.com/research/sala...%20%2456%2C133.

The average starting salary in 2019 for teacher is between $42,448 and $56,133 in NJ. Union dues and mandatory pension contribution are significant as I am finding out.

[Moemg]

I am guilty of bailing my daughter out on several occasions .I finally stopped and she has done great . It is easy to enable our children but it is not the wise thing to do. Pay September's rent and let her figure out the credit cards .

[HMMY]

I know a 48-year who has his own business and maxed out credit cards. He likes to live large. His mother finally stopped paying them off whenever he couldn't make payroll because he would only max them out again. You don't want to be bailing out your daughter into her 40s.

I agree with others who propose you gift her September rent. Tell her what you would do (curtail unnecessary spending and pay off the credit cards by getting a part-time job or roommate, moving to a cheaper place, moving home, selling goods on eBay, etc); however, tell her the ultimate decisions are hers and let her suffer the consequences of her actions. Tell her that she can access the brokerage account at will if she needs it and happy to review her plan for soundness if she wants to run it by you.

[wrigley]

Quote:

Originally Posted by mystang52 DW is a recently retired NJ teacher. We put aside a set amount from each paycheck for the summer cashflow [I'm a neurotic/obsessive? budgeter]. But she had the option of getting 24 paychecks vs 20. She would talk herself blue to some of her colleagues about using the 24 pay option, whenever they complained about their financial struggles over the summer, even though she likely convinced maybe 1. This 24 pay option is clearly Step 1 for OP's daughter.

I asked that earlier. Did NJ change teacher's pay schedule?


https://www.early-retirement.org/for...ml#post2477337


https://www.early-retirement.org/for...ml#post2477507




Mike

[Delawaredave5]

I wouldn't loan/give whole amount. Tell her you'll "match" 1:1 or 2:1 whatever she can save.

She won't learn by you "giving her a fish".

Also part of the plan is listening to Dave Ramsey each day and having talks every couple days about episode specifics.

I did this - worked marginally.

[mystang52]

Quote:

Originally Posted by wrigley I asked that earlier. Did NJ change teacher's pay schedule? https://www.early-retirement.org/for...ml#post2477337 https://www.early-retirement.org/for...ml#post2477507 Mike

1) AFAIK the 24 payment option is still an option. [or, just budget for those summer months; it's not exactly a surprise that no checks are forthcoming in the summer, with the 20 pay option]

2) To OP: maybe I missed it, but why not just have daughter withdraw money from that investment account? She's then starting over with a clean slate, a learned lesson, and frankly not a big financial hit.