Case study lending money to family

Gwen lends her son $80,000

Mature woman checking her financial situation onlineGwen, 68, has lived by herself since her husband passed away. Her son, Joe, recently asked her to lend him $80,000 so he could set up his computer business.

Gwen is worried about lending Joe the money, but she has retirement savings and wants to help him. She contacted the Centrelink Financial Information Service (FIS) for free advice, and the FIS officer made an appointment for her to see a local welfare agency for financial counselling.

Gwen met with the financial counsellor, who helped her work out how long her reduced retirement savings money would last. The counsellor advised that, if Gwen still wanted to lend Joe the money, she and Joe should both sign a written agreement.

The agreement would have to be checked by a legal professional. It would have to detail whether Gwen needed to be repaid, by when, and if interest was to be paid. This would prevent any disagreements about the loan in the future.

Gwen decided to go ahead with the loan, and contacted the FIS again to see how the change to her finances would affect her pension payments.

'My husband took care of our finances until he passed away, so it was quite stressful having to arrange this loan for Joe,' Gwen said. 'But I think it will help get Joe's business off the ground, and with his second child on the way, I thought he could really do with a helping hand.' 

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Last updated: 18 Apr 2017