I was going to call this post, “Don’t lend money to family members,” but then I decided it was too narrow. Here is my tip, families should be able to honestly communicate their financial status.
I have seen too many parents put themselves into a negative financial situation because they were embarrassed to tell their kids they did not have the money to help them out. I have one particularly sad case where a father put a big mortgage on his house to help his son start a business. The son had no idea his dad had borrowed the money he gave him and when the business failed the son went bankrupt and the Dad had to sell his house. Communication could have prevented that situation.
Another situation is when the parents make enough money that the child cannot qualify for a student loan. The issue is the parents don’t have enough money to cover their child’s tuition. Discussing this before the kid is applying to universities is a good idea. Are there any financial discussions that your family should have sooner rather than later?
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