Kevin O'Leary Explains Why You Don't Loan Money to Family Members
You could say that Kevin O'Leary has done all right for himself. He's an entrepreneur, a multimillionaire and star of ABC's "Shark Tank." So, it's likely that he's been asked for a loan by family members on more than one occasion.
In an interview with Business Insider, he said his response to these kinds of requests — and indicated you should respond the same way if a family member asks you for a loan.
Family Dynamics Are Complicated
If you are fortunate enough to have built up a respectable bank account, you may find yourself in the position O'Leary has been in before: A family member asks for a loan. Perhaps they want to start a business or buy an investment property. They're sure they will be able to pay you back, with interest.
But this can get complicated quickly. What happens if the borrower can't pay back the loan? Or if they find they need more money than they originally thought? Mr. Wonderful, as O'Leary is also known, has a solution.
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Your New Firm Rule: Don't Loan Family Members Money
Despite his wealth, O'Leary does not loan money to family members. It's not that he's too frugal or that he's heartless and it's certainly not because he doesn't have the money to lend. Instead of making a loan to a family member, he'll offer them something else.
Give Them a Gift Instead
If a family member comes to Kevin O'Leary asking for a loan, he will offer them a gift instead. He'll give them the money — or a significant portion thereof — outright, with a couple of caveats.
First, it is a one-time gift and there will be no future gifts. He says this outright at the time of the agreement and insists that he and the family member shake hands on it. Then, he agrees that he and the recipient will never speak of the gift again.
"I do this because expecting a family member to pay you back is a real issue," O' Leary said. "If they're already in a bad place, why would loaning them money help them, if next week you expect back payments? That's just not the case and it's almost never the case.
"Instead, call it what it is — a gift. I'm happy to give that gift. I feel good about it and I understand I'm never going to get it back and I never intended to. Make it a generous one and make it the last time," he concluded.
This may seem harsh or abrupt, but it seems to have worked for Mr. Wonderful. Never lending, but giving, money to a family member can prevent a lot of awkwardness down the road.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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