There are some things you should think about before you agree to lend money to a family member. Maybe you’ve already been tinkering with the idea. Or perhaps you’ve given it a no no. Even if your children are grown, it’s natural to try and help them if they’re struggling. In fact, nowadays many children (even friends) have been turning to their parents and other family members for financial support. There’s some things you might want to consider (even though you have the best intentions) before moving ahead on this important (even major) matter about lending money to someone else.
So first, in spite of your desire to help, it’s not generally a good idea to remove any funds from your retirement account (that is your 401K) if you’re lucky enough to have one. That’s because you might have trouble being able to manage your own expenses when you retire. Also, common sense dictates that you should leave your retirement savings alone so that they can continue to grow (and that means tax deferred) for as long as possible. If you’re under the age of 59 1/2, there’s even a penalty to do it. So it might be a better idea to get a short term Florida title loan (they have the lowest interest rates) to help one of your children or family member get back on their feet. Like for starters to pay their overdue rent and utility bill rather than to empty your retirement account.
Secondly, think carefully about how long you will be able to provide financial assistance. It’s a good idea to make sure that if you do help someone else in time of need to make sure they have agreed to a repayment plan. That’s because there’s nothing worse than getting into a family feud because of a good deed going bad. No reason to let a business (really friendly) transaction trigger any family friction. Another bit of advice if you find a child or family member in need of help right now is not to touch your emergency fund (like those stashed away savings you’ve worked hard to accumulate). It does make good sense to have a safety cushion in the event of your own emergencies because it doesn’t help a family member or one of your children if you (yes, you) get into financial difficulty. So save your slush fund for another time.
Thirdly, ask yourself if lending money will really be helpful. In other words, step back and think about why your family member is in this situation. If financial support is needed due to impulse buying or overspending, even ignoring a budget (or not having one), think about that they might benefit from emotional support by learning to recognize poor spending habits. There’s really nothing wrong in offering to come up with needed funds (and car title loans in Florida are especially good for that). But they can also be used as an incentive to motivate those seeking help to take control over their own financial life. And if the money you lend to family or your child is a loan simply spell out the terms by writing them down. There’s nothing the matter with having payments to you direct deposited to your checking account. So make that part of your agreement.