How Should I Share My Wealth with Family?

The only thing harder than making a ton of money is giving it away to family.

On paper, it sounds easy. We've finally got some dough and now we can hand it out like Robinhood to all the people in need. What could feel better than helping our family with a little extra cash?

That's until we find out what a giant tangled mess of problems it tends to create. What we are thinking about is how helpful we can be, but what we're not thinking about — and where most Founders live in regret — is what a can of worms we open from here on out.

It. Never. Ends.

The problem with giving away money once is that once we open those floodgates, they are nearly impossible to close. All it takes is a single act of kindness to send those gates crashing open.

Here's how it happens. We decided to give our dear Uncle Shaggy some money. He's wonderfully appreciative, and soon Aunt Velma and cousin Daphne hear about it and come asking as well. Now we're stuck, because how do we tell Velma and Daphne "No" if we just helped out dear old Shaggy?

And it doesn't stop there. If we've lent Uncle Shaggy money once, how do we determine when and if he can get it next year, or two years from now? Now, instead of being kind to one person , we're a total a-hole to the whole family. We can't hand out the Scooby Snacks once and expect everyone else not to want a taste.

It's Never a "Loan"

Few people have the gall to just say "Give me your money", even though that's really what they want. Instead, it's almost always presented as a loan. Asking for a loan feels like a more even exchange to all parties.

That is, if it's actually paid back. You see, when we take someone's money and then don't pay it back — that's not a loan. That's just taking someone's money.

When people ask for a loan, instead of pretending that we're going to be repaid, we're much better off taking the loan out of the equation. That's because the only thing worse than not getting paid back is forever being stuck in a relationship with someone that owes you money.

Call it a gift, call it a payment, call it whatever you want. Just don't call it a loan unless you plan on opening a bank. If you really enjoy running a collections business, you'll really enjoy lending money to people you care about.

No Financial Relationships

The most effective response I've encountered between Founders and their loved ones is to say "I don't want a financial relationship with you." Prior to making some money your relationship existed just fine, so presumably keeping money out of the relationship should help maintain that consistency.

Obviously, that's not going to make everyone happy in the short term, but it does help separate your relationship with them with your bank account. I've heard Founders tell their loved ones "Look, if you need me to help you move your furniture — I'm there! If you need to talk through some tough issues you're dealing with — make me the first phone call! I want to have a great relationship, I just don't want it clouded with money."

In the end, it's impossible to make everyone happy. But what we don't realize at the time, is that it's nearly impossible to keep everyone happy with your money.

P.S. Giving away money to family is an incredibly personal experience and your mileage may vary. I hope it works wonderfully for you, whatever choice you make. This is just intended to be some hard-earned advice from an awful lot of Founders who have dealt with exactly this issue, including yours truly.

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