Help! My retired parents want me to give them money to start a goat farm (with no experience)
Beth takes on a tricky new money question—and offers expert advice on how to resolve it and how to talk it over in constructive ways.
“My dad and mom are retiring from their jobs as nurses to start—wait for it—a goat farm. (Actually, an agritourism bed-and-breakfast with a goat theme.) And they’ve approached me about investing “seed money.” They’re both city kids—grew up in Richmond, Virginia—and worked in healthcare, so their experience in the new field is less than confidence-inspiring. I want to support their dream, though; they supported mine, after all. (I’m a freelance game designer.) My career is going well, and I can spare a few thousand dollars. But this whole Plan B seems pretty shaky. How do I tell my parents that I’m not comfortable investing much without hurting their feelings?” —name and address withheld
There’s no shortage of advice out there for entrepreneurs hoping to raise capital by hitting up relatives. But what if you, like our friend with the goat-loving parents, find yourself on the other side of this pitch? First, know that your situation is common. The majority of U.S. businesses are family operations. Family businesses get started, in part at least, with family savings. For instance, there’s that guy who started his first web site with $28,000 from his dad. Elon something? The website, Zip2, later sold for $341 million, and you probably know the rest of Mr. Musk’s rocket-fueled rise to fame and fortune.
Space X, goats—what could they possibly have in common? Everything, when we’re talking about lending to family. I actually sense two questions here: Should I (reluctantly) give my parents money? And: How do I express my reluctance? A finance question and a personal question.
Let’s start with the finance angle. The headline advice I give when anyone asks about loaning money to family is this: Don’t. Of course, there are special circumstances in which bankrolling a relative can’t be avoided—say, your brother needs money for medical costs his insurance won’t cover. Yours isn’t one of those circumstances. But you’ve decided to pitch in, so let’s talk about the smart way to do it.
For one thing, you need to be okay with the idea that you may never see this money again. You and your parents can refer to it as a loan—you should, actually, for reasons I’ll get into soon—but don’t expect them to pay it off and don’t press it if you suddenly are short on cash. The last thing you want is for a kind gesture to turn into a squabble over money.
You used the word invest. Careful. No matter what your parents call it, this is not an investment. Say you do end up going in on a major stake in the goat farm. While you might see a profit, you could also be responsible for any financial trouble the company gets into—and that’s not a position anyone wants to be in with family or friends.
Now to your second question: If you’re not comfortable investing very much in your parents’ new business venture, how do you tell them without hurting their feelings? A few ideas for talking it over without getting anyone’s goat. (Sorry.)
It seems as if you’re willing to contribute a small sum—and given your skepticism, this seems wise. Maybe you could offer to buy a piece of equipment they’ll need for their new agricultural retreat. This will encourage your parents to think hard about how much they actually need and for what. And it will create a concrete, positive reminder that you’ve got their back. I’m no farmer, but let’s say you buy them professional grooming tools, feed troughs, and goat-proof fencing?
Make it an ongoing conversation
If you feel like offering more, perhaps you could plan to revisit the conversation in six months or a year. This will give your parents time to show that they can make a go of it and are dedicated to the project. When the glamour of rising at dawn every day wears off, they may decide to return to healthcare.
Offer to help in other ways
No, I don’t mean muck out the goat stalls. Maybe you’re more handy with the internet than they are and can set up a Kickstarter for the project. And perhaps there’s a goat-themed premium you could dream up to offer as an incentive for backers. (Just thinking out loud here.)
Take their plan seriously. But remember, humor goes a long way toward sapping the tension. Goat puns are encouraged.
Ask for “comparables”
If your parents have done their research, they will have ready examples of similar businesses. Ask them about others who’ve tread the same back-to-the-land path: What was their background? What challenges did they face? How long did it take to make a living?
Get it in writing
If you ultimately decide to front them some cash for the goat-B&B, draw up a loan agreement with a timetable for repayment and interest. Sound extreme? It isn’t. Extreme is fighting over money down the road because you aren’t all on the same page. On paper, this should be structured like any other loan: You expect monthly payments plus interest, with eventual full reimbursement. In your heart, however, you should regard whatever you give as a gift. Like I said earlier, lend only what you’re willing to part with forever. And—unless you’ve made a formal monetary investment in the farm, as opposed to lending seed money—if there’s suddenly an avocado-scale craze for goat-milk yogurt (yum!), and your parents strike it rich, don’t go asking for a piece of the action. Because in the end, money is nowhere near as important as your relationship with your family. If you’re looking to draft an agreement, websites like Nolo.com and Internet Legal Research Group are a good place to start.
Don’t feel guilty
Yeah, good luck with that, right? Well, here’s the thing: In finance, you help another party with the expectation that their success will come back to benefit you. Family rules are different. I understand your feelings when you say that you owe it to your parents for helping you financially. But food, lodging, and college tuition—that wasn’t startup funding, it was just the cost of raising a child. And that’s an investment that pays off in love, not money. And it sounds like you give your parents plenty of that.
Check out more articles from the My Money Mess series.