April 25, 2024

Kevin O’Leary Says Don’t Loan Money to Family Members — Do This Instead

Andrew H. Walker / AWNewYork / Shutterstock.com

Andrew H. Walker / AWNewYork / Shutterstock.com

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.

See: 7 Key Signs You’ve Reached Financial Freedom
Find: 6 Unusual Ways To Make Extra Money (That Actually Work)

In an interview with Business Insider, he described his response to these kinds of requests — and indicated you should respond the same way if a family member asks you for a loan.

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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 known, has a solution.

Read: I’m a Multimillionaire — 3 Ways I Maintain a Frugal Lifestyle To Stay That Way

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. It’s certainly not because he doesn’t have the money to lend. But 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.

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This article originally appeared on GOBankingRates.com: Kevin O’Leary Says Don’t Loan Money to Family Members — Do This Instead

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