Loan to Daughter

[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]

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]

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]

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]

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]

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]

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]

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]

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]

... 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]

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]

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]

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.

 

[Rustic23]

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...

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.

 

[Chuckanut]

Our rule with our kids: it is one thing if something happens that is not your fault, we can be flexible. But if you dig yourself into a hole, we will help you figure how to get out, but it will not be with our money.

I agree with The Stomper.

I am currently helping both my children to a limited extent. They were both doing well until the CV19 hit. One lost her job and the other lost her source of cheap child-care (public schools). I split my $1200 stimulus money between them. I now help with child care for the grandchild both in time and $s. The other child found a 2 day a week job, so I may be needed in the future.

I see no point in letting this CV mess drive them into the financial pits while they wait to inherit from me in 20+ years. I'll help them now, when they need it, and they will simply inherit a bit less in the future. Win/Win.

 

[statsman]

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.

If our only child were in a position of need and we chose to help, it too would be a gift. I agree that loaning money between family and friends can go horribly wrong. The question for some is whether the gift would be "wasted" on someone who wouldn't spend it to the satisfaction of the giver. In that case, don't gift.

I think the belief that all children learn their lifetime spending/saving habits from parents may be a bit misguided. I've known plenty of people who had great parents and who lived a nice life under their roof, only to have numerous failings when out on their own (college, work, etc.). Real life isn't so cut and dry. Sometimes, all it takes is one really bad decision to undo a lifetime of good teaching and habits.

 

[pb4uski]

No, there is no objective evidence that the daughter is living beyond her means. ...

That she can't pay her rent or her credit card bill without selling securities in her brokerage account might be a leading indicator.

.... If she did not have $26,000 in savings then yes you could say she was living beyond her means. Her "means" include the $26,000 in savings, which belongs to her....

It is unclear whether the $26k is savings from her income over the years or the accumulation of gifts, etc and growth over many years. IF the $26k is substantially a result of her savings then I think you have a valid point. I suspect it is probably more the latter.

....The notion that if OP were to give his daughter her money back, it would create a "sink or swim" situation, is ludicrous. ..

It's not "the OP giving his daughter her money back"...... her name is on the brokerage account... she can access them any time she wishes. While the OP hasn't been specific, I presume that she knows of these accounts and has decided not to access them and to allow the OP to manage them for her.

You make it sound like you think that she doesn't know that the brokerage account exists or is barred from accessing it.

The "sink or swim" is your position of giving the daughter her brokerage account, washing your hands of the situation and walking away and not counseling the daughter.... just throw her in the deep end of the pool and hope that she doesn't drown.... seems foolish to me.

Like I say, I disagree.

 

[aaronc879]

I see your daughter is working in NJ. Rent can vary greatly in that area. Is she in an appropriate apartment for someone just starting out or did she go into a high-end place? Maybe she can go 5 miles further away to an apartment that is $500 less per month or get a 2 bedroom and get a roommate. I looked up teacher salaries in the area I think she is working and they seem very reasonable so that's not the problem.

 

[Katsmeow]

When I was about your daughter's age, I made a similar call to my parents for a similar amount (less in actual dollars but it was almost 40 years ago). I had a good salary but I was was definitely living above my means and spending too much. My parents loaned me the money. I have often thought that I would have been so much better off if my parents had said no.



Don't loan her the money. This is a situation she can get out of on her own. She may be able to work with her landlord on the rent. She could withdraw the money from the brokerage account (not perhaps wise but she could do it). She can live more frugally to pay off the credit card bills. She can solve this. If she was out of work due to Covid, it would be a different situation perhaps. But this is something she can solve. Even if her apartment is a 1 bedroom, she could get a roommate. My daughter has a roommate in a 1 bedroom apartment. She sleeps in the living room.

I know many people here say that what made them frugal was having frugal parents. Well, I had frugal parents and hated it. When I got out of school and got a good job it felt like I had been let out of prison. I had a lot of pent up demand.

Anyway, they did loan me the money. I paid off the credit card bills. But, I ran them back up and basically learned nothing from it. I didn't intend to run the bills up again. I didn't intend to not pay back the loan. I wanted to live to a budget, etc. But I had a good job and could get lots of credit and in some way I thought of credit on a credit card like it was money. (Yes, I understood interest but having something now had more appeal).

So the money didn't help me and did, in fact, enable me to continue doing what I had been doing. I did eventually learn how to manage money but it took years.


If you do loan money get her to sign a note. For some kids that does make a difference as it gives a hard time when repayment is to start. I would start payments a few months from now and make them a reasonable amount for her budget. But, really, this is a problem she should solve. You should let her do it. We did so much better with our daughter when we stopped solving these problems for her. She is now about to move into a larger apartment because she stop spending too much, started saving, and now has the money to pay more rent.

 

[ImaCheesehead]

So, in three months time, the budget has been blown by $5,200 which is over $1,700 per month. That is a large amount and there were no emergencies so that says to me that she never really had any intention of following your budget in the first place.

Now, after your new loan to her, you still think she is going to start following the budget - but it is going to be even smaller and harder because she now has a loan payment to you.

I don’t think this is going to work out the way you want it to, sorry. For her to get on the “right track” is going to take significant behavioral changes and there doesn’t seem to be any sign of that yet.

I would say that she should need to use her own money to pay off her own debt.

 

[rodi]

Agree with Katsmeow that if you do loan her $, have her sign the note, print out a payment schedule, discuss what the consequences of late or missed payments will be.

I borrowed money for the down payment on my first house... We had it formalized with a note, I paid interest, and never missed a payment. Having that contract/note made it much more real and I didn't want the shame of failing to pay.

That's if you loan her the money....

You've been given lots of perspectives here. Now it's time for you and your wife to figure out what you're going to do. No easy answers - gifts might be enabling, loans might be enabling or cause family angst in the future, letting her suffer her own consequences is a harsh lesson she might not be ready for.... No easy answers and people will criticize you regardless of what you choose.

 

[caninelover]

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

Sorry to hear about your and your child's troubles. It sounds like there may be deeper issues that she is getting help with, which is great. My only suggestions would be to encourage her to cut up her credit card in front of you (vs. you holding it) - that will have more ceremonial impact to her - and encourage her to use cash (or a pre-paid cash card) for all spending until she can control her shopping impulses. Also may be a good idea to encourage her to sell some of the furnishings/stuff purchased over the last 3 months. When she sees how little people will pay for something used, it may give her some pause about buying brand new things (clothes and furnishings) in the future.

Good luck and I hope it all works out in the end.

 

[tmm99]

You've been hand-holding a bit too much IMO. You don't want to become someone who will always bail her out (even with a loan with a 1% interest.) unless she's physically ill or something else that warrants assistance. She needs to learn the lesson of "actions and consequences", and the sooner she learns, the better off she will be. She also probably should manage her own money so she can learn.

Having said that, I would suck up and pay for the rent and the credit card debt and see if she could break the lease (if there is one.) unless she cannot use her saved money. If I had to pay for her debt, I would offer her to move back in, but I would have her sell all the stuff she bought on eBay-type places and I would take the proceeds to pay for the debts/accured-rent I covered. If she's not willing to sell her stuff, I would do it myself, but I would take away her car and sell it to pay off the debt and she can take public transportation from now on. I would suggest she find a room somewhere to live instead of paying the rent for a full apartment.

I know my suggestions are drastic, and you don't have to take any of them, but I hope you will do something. Like I said, there should be consequences for her actions. I wouldn't learn much from getting a loan with a penalty of 1%. She needs to feel the weight of what she did NOW and whatever the consequence she will face needs to hurt a bit.

From now on, I would not rent her money and I would not give her any big monetary gifts. (And I would let her know that and stick to it...)

Life was tough when I first started out, living in a roach-infested studio apartment, and I had to change busses twice to get to work. I remember my mom saying "Use a stiff cardboard box as a table until you have enough money saved up." I felt a sense of accomplishment when I had enough money to get real furniture from Goodwill. I'm grateful that I got to experience this when I was young.

Whatever you decide, good luck to you.