Loan to Daughter

[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]

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/forums/f28/loan-to-daughter-105308.html#post2477337


https://www.early-retirement.org/forums/f28/loan-to-daughter-105308-2.html#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]

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


https://www.early-retirement.org/forums/f28/loan-to-daughter-105308.html#post2477337


https://www.early-retirement.org/forums/f28/loan-to-daughter-105308-2.html#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.

 

[SonofCohoes]

Hi... I'm 61 years old, FIRE'd since November 2018. DW is 62 - 2 daughters - a 24 year old and a 21 year old (w/ some special needs).The 24 year old is a teacher at a local high school and moved out to her own apartment in May. 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) and worked with her extensively on a budget that would work for her. We gifted her a return of all the rent money she paid to us while living with us since college - including help with buying a new car.

3 months in to her new apartment life - she's in financial trouble. Not enough money to pay September's rent and about $3K on her credit card. After a long, tear-filled phone call yesterday - offered her a 3 year, 1% interest $5,200 loan to give her a clean slate. She needs to work her loan payments into the budget and refrain from all the extra spending that got her in trouble. She went hog-wild on clothing and furnishing the apartment as well as miscellaneous other things she wanted. Despite years of working with her, she has no control over her spending - shopping addiction - warned her multiple times that if she came back to us not being able to pay the rent, it would be a painful conversation - it was (for all of us). Told her that if she gets in trouble again, our only help is pack up the apartment and move back in with us (which none of us wants).

She does have about $26K stowed away in a brokerage account. It's her money, in her name, but, at her request - we manage it and don't give her access to it. Advised her not to draw on that for this situation and to take the loan instead - take the pain to learn the lesson - we hope.

Should mention that we're in the process of selling and building/buying a new home - so our finances are a bit in flux - not crying poverty, but cash flow is important right now - so, lousy timing.

She's working with a therapist on a number of issues right now (including this "shopping issue"). I also advised her to give me her credit card until she gets control of the issue.

So, any other advice? How do we get this girl on the right track?

Thanks

I haven’t read anymore than this post and it may have been asked, but how is a 1% loan pain?

 

[Buckeye]

Check out the TrueLink Financial debit card if she wants her spending to be monitored (by you).

 

[sheehs1]

Mitchjav, this is a tough call. Parenting can also be tough.
You and your wife have already gifted her the rent paid to you while she lived there (good try and teaching moment in making her pay you rent), helped her buy a car, and held her hand as you helped make sure she could make it during the 3 months of summer.

She has money, 26K in a brokerage account. Not knowing how that was accumulated I suggest you tell your daughter she will have to use HER brokerage account money for the September rent. The message here is that "she will have to use HERS and not YOURS". It won't break her.

The $3,000 credit card debt requires a bit more thought but I am inclined to think SHE should pay this off monthly. Yes, regardless of the high interest rate fees. How else will she learn that charging something for $300 requires one to pay it back? Yes it might take her a while to pay it off. This may not work if she is not at all disciplined with money. (and that sounds like the story here) In that case, I would also take the the money for the credit card debt out of her brokerage account. Again, the message is that it is HER Money she is blowing thru and not YOURS.

This happened in 3 months. Can you imagine what can happen in a year...or longer?

Save your money because if she can not get this under control she is going to need more help later. If she does get it under control and if you decide to do it, you can always replace the brokerage money by gifting it back later.

It is the teachable moment right now that is important. Make her use HER brokerage money.

 

[Shardo]

Been there, done that. Four years ago, we agreed to help our freshly minted RN DD get into a condo. Signed the purchase agreement and immediately totaled her car. Car payments were not factored into her expected cash flow needs. Then the furnishing began. Ended with a similar sized credit card hole and the tearful phone call.

We agreed she should dig out of the hole herself so that a recurrence was less likely. DW helped develop a budget and was added to her accounts so she could monitor DD's progress. The good news is that DD seems to have found her financial footing and has squirreled away $40k between retirement and brokerage accounts in the meantime. Not bad for a 27 year old considering the 23 year old person she was. Now if we can just keep her from piling up her car....

Tell her to put down the phone and PAY ATTENTION!

 

[Sunset]

OP - Tell your daughter she doesn't have to pay the rent, as cannot be evicted.

https://www.marketwatch.com/story/c...-control-coronavirus-2020-09-01?mod=home-page

I pity all the poor landlords.

 

[iloveyoga]

I think young grown adults should do their own budgets and monitor their own accounts. That is how you learn.

 

[copyright1997reloaded]

This is one of those threads with a lot of opinions and expertise!

A few observations:

1.Credit cards are obviously useful and convenient - but in terms of keeping spending under control are bad news. In the old, old days people learned budgeting using the envelope method - which helped to force proper spending. Having her learn/use similar "modern" day methods might be useful.

2.Never (?) lend to family. If you can't afford to gift it, don't lend it. [This is a do as I say and not what I do kind of thing - I fronted my niece close to 100K for a 1-2 year loan for a property purchase. However, in this case I did at least require a formal mortgage note (filed with the county) so I would at least have the actual land if it went sour.]

3.Children today are endlessly exposed to the "you deserve" life-style. New clothes, furnish the apartment, nice cell phone and car, etc. For many, the idea of sacrifice has been lost. When I left home at the ripe age of 20 for my first real (full time) job, there was absolutely no thought of my own apartment - I shared one, absolutely no though of buying a bunch of furniture (everything was given/old/abused stuff). No recommendation here, just that many young adults have expectations that they shouldn't.

4. Reading these stories about children, loans, unable to control spending, and so on scares the xxxx out of me. Why? Because I have a child - still in school - but if my child isn't able to manage their budget property, it will be a true mess when they end up inheriting my money in the sense that so much will be wasted that they should otherwise do good with and/or enhance the lives of their children.