Loan to Daughter

[jollystomper]

Maybe a compromise solution is one possible approach. For example:

- She cannot pay Septembers rent. Nothing was said about subsequent months. Give her September's rent as a gift. But tell her that gives her a month to find a supplemental/part-time job to avoid this happening in October. I see lots of stores looking for part time workers these days.

- She has 3K in credit card bills. Do not give her a loan to pay it all off now. Figure out what the minimum monthly payment is needed to keep her credit in good standing, and have her pay that off and show that she is not adding to it. Her bills remaining high, near the credit limit, will help keep her from adding to them again rapidly.

- If you choose the loan route, do a lesser amount, and make it contingent on her going through a program like Dave Ramsey or something similar.

This type of approach makes her suffer some pain, but you are not putting her into an immediate "sink or swim" situation. You are throwing her a rope but towing her back to port, not letting her climb into the boat. She can make the effort to pull herself along the rope to get into the boat.

 

[Sunset]

..... 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.

....

I used 2 cardboard boxes covered with a cloth as my coffee table. Works really well if you tape the boxes shut.

 

[target2019]

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.

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...

Coincidentally, I just had a discussion with visiting daughter (30), who is starting a non-teaching job at NJ school. Her situation is complicated, but I can empathize with you since it's the same state and a daughter. Special rules apply, right?


I explained our family bank concept and how loans work, then gave her the amortization chart for free! The loan is for an advanced degree in her field, maybe two loans to cover her 2nd year. She already paid for year 1 of 2. She'll set the terms and when to start payments.

People say don't lend family money, but I'm willing to risk this. She knew the reasons we're in good financial shape, and was happy to tell me in her own words. She understands that this bank is not a magic fountain, and how she treats this loan and other matters will lead to a brighter future.

I know how your daughter's story turns out, mitchjav.

 

[Gumby]

I used 2 cardboard boxes covered with a cloth as my coffee table. Works really well if you tape the boxes shut.

When the young wife and I first married, we used our boxes of college books as a TV stand. We got the couch and chair because the lady across the street was throwing hers out after 30 years of service and asked for our help carrying them out to the street for the trash man. We just kept on going right to our apartment. The cushions were torn, but we just put a blanket on it. For other stuff, we shopped the curbside on big trash day.


We never had a coffee table until about 4 years ago.

 

[aaronc879]

I used 2 cardboard boxes covered with a cloth as my coffee table. Works really well if you tape the boxes shut.

I'm 41 and I still have never purchased any furniture unless you count a bed. I just recently purchased my second bed in the 22 years I have been on my own. Basic metal frame for each bed and average quality new mattress. Too many people these days expect to have every luxury right from the start.

 

[MrsHaloFIRE]

Sounds like she learned nothing. And you learned nothing. I think you're just prolonging the inevitable on this. I have no children so of course I think I know all about parenting.

 

[bloom2708]

Time to give her control of the brokerage account and let her pay her bills off. Another loan doesn't help with low income.

Why didn't she work this summer? Does she have a job lined up for fall?

 

[Sunset]

I'm 41 and I still have never purchased any furniture unless you count a bed. I just recently purchased my second bed in the 22 years I have been on my own. Basic metal frame for each bed and average quality new mattress. Too many people these days expect to have every luxury right from the start.

You certainly have a LOT of restraint !
Must be easy to vacuum (if you have one).

 

[Teacher Terry]

I would pay September rent only and let her pay off the CC debt herself at a high rate.

 

[aaronc879]

You certainly have a LOT of restraint !
Must be easy to vacuum (if you have one).

I have furniture, I just didn't pay for it. My couch and sofa are hand-me-downs from my parents. They are 30 years old but still serve their purpose. I have a lift chair that I got before my hip replacement from a local charity. I have not returned it since I am permanently 40% disabled. I have several end tables for various uses that were all hand-me-downs. Cheap but serve their purpose. No reason to waste money on new stuff when the stuff I have works.

 

[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]

Loan to daughter

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]

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]

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]

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.

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/sal...vel Teacher,falls between $42,448 and $56,133.

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.