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Investment InformationInvesting In Son's Business Could Cause A Real Family Feud
by:
Tim Knox
Q: My youngest son wants to borrow $5,000 to start his own business. My adult female is afraid to tell him no. She thinks we should simply give him the money and not expect thing
in return. I disagree. He doesn't have a really nice track record with money, so I'm a little distressed that my investment will be lost. Should I loan him the money and hope for the better or simply tell him no and hope he doesn't get too upset?
A: The 1st thing you need to do, Jeff, is determine if this money would-be be offered to your son in the form of a gift, loan or investment. The really choice of words of your question tells me that you have not yet ready-made that all-important distinction.
It sounds like your adult female wants to do a gift of the money, expecting nothing in return but the immortal
love of her last born son.
You, on the different hand, don't cognize if you should offer the money as a loan (should I loan him the money) or as an investment (worried that my investment will be lost).
Until you can do that distinction, your money should remain in the bank.
I have a really simple rule once
it comes to disposal money to relatives: NEVER, EVER loan money to anyone you power have to sit next to at Thanksgiving dinner.
"Son, pass me that dressing and tell everybody the story of how you blew your old dad's retirement money..."
A loan from a relative is no several than a loan from a bank. You, Mr. Banker, are giving your son, Mr. Borrower, the use of your money for a specific period of time and you fully expect the loan to be paid back under specific terms, even as if his business goes south. Sure, you will probably be a little much forgiving than a bank once
the loan goes unpaid, but the damage to your personal relationship could be extreme and hard to repair.
In the most basic of terms if you loan your son the money you become the human and he becomes the debtor. Have you ever detected
of a human and human having a really nice relationship? Has Visa ever called you up simply to ask how you're doing? Has your mortgage institution ever named a kid after you? Probably not.
The same rule applies with finance
in a relative's business. I have raised money for several business ventures and not once did I ever think simply about asking my relatives to chip in. The last thing I'd ever want to do is lose my mother's yard sale money. I'd ne'er
hear the end of it!
An investment is ready-made with the understanding that your money is all at risk with no guarantee of return. Even as under the better of conditions an investment in any business is a gamble. You are card-playing your money that the business will be eminent and that you will get a payback at several point in the future.
Hug your money real tight before fashioning the investment, because if the business doesn't do it, you will ne'er
see your money again.
You and your adult female as well seem really distressed simply about fashioning your son mad, which raises another brobdingnagian red flag for me. If your son isn't mature enough to take the word "no" without deed upset, he's for certain not mature enough to start and run a business. Unless that business is a bicycle paper route, and even as then I wouldn't put my money on his chances of success.
The bottom line is this: if you can afford to give your son the money and can do so without attaching strings to it, then by all means give him the money and will him well. Encourage his entrepreneurial spirit and keep him as a parent should.
Do not, however, expect thing
in return and ne'er
bring up the money again, especially if he's the one carving the turkey on Thanksgiving Day.
Here's to your success!
Just simply about the author:
Tim serves as the president and CEO of three eminent technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs http://www.prosperityandprofits.comhttp://www.dropshipwholesale.nethttp://www.30dayblueprint.com
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