Barefoot’s advice to parents whose son squandered their $30k loan

A couple who loaned their son and his partner $30,000 for a home loan only to have them squander it are at odds about what they should do. Scott Pape has some advice.

Scott Pape is The Barefoot Investor. Picture: Jason Edwards

The prisoner stared deep into my eye sockets, leant back in his chair, and slowly raised his hand.

“Can I share something?” he asked.

“Shhhh … ure” I said nervously, looking at the other inmates sitting around the prison table. “Before I got locked up in here, I read your book, and I set up all my Barefoot Buckets. But I also added another bucket that I named … ‘Drugs’. And it worked like magic. I never missed my rent or my rego, and I always had plenty of money for my drugs”, he said triumphantly.

Weirdest testimonial ever.

However, as I looked around the room, all the hardened crims were nodding their heads approvingly.

Then I hit them with it.

“The Barefoot Benchmark is to try and live off 60% of your income”, I announced.

“And then you set up savings buckets for treating yourself (Splurge, 10%), long-term savings goals (Smile, 10%) and putting out financial fires (Fire Extinguisher, 20%).”

Folded arms.

Even some prisoners are following the Barefoot Buckets.

In a cost of living crisis, who the hell can live off 60% of their income?

Answer? Not many.

In fact, after reading my book, people write to me all the time – OFTEN IN ALL CAPS! – telling me how deluded I am. You can sense the murderous rage exploding out of each exclamation mark!

Yet today I was sitting across from men who had literally killed people.

So, reading the room, I told the inmates that the percentage splits don’t really matter, suggesting they use it more as an exercise to find out just how much it costs you to keep your high beams on.

I explained that things may be so tight that some people could be only putting $2 into their Smile bucket. What really matters is that you set up all the buckets and put the entire plan on autopilot. And that is the ultimate get-out-of-jail-free card.

Final tip: don’t do drugs … or at least try not to get caught

Tread your own path!

Should We Forgive Our Prodigal Son?

Hi Scott,

My husband and I loaned our son and his partner, who have two small children, $30,000 as a deposit on a house. At the time we explained to them that we were not well off, that we were still paying off our own mortgage, that the money was to help them secure a home, and that they could eventually pay us back using their own house as collateral.

Well, they squandered it (we still don’t really know what on) and my son is very remorseful, though his partner not so much. So no house and $30,000 gone!

My husband and I are now at odds – he says our son has to be accountable and pay it back. I’m feeling awful about it all and just want the old relationship with my son back, so I want to write off the loan as a gift (albeit ill spent) and move on with our life.

Hubs says a firm NO. So, should we forgive and forget, or make them scrimp and save to pay it back over countless years?

Loving Mum

Caucasian couple enjoy outdoor luxury party drinking champagne with talking together while catamaran boat sailing at sunset. Man and woman relax with outdoor lifestyle sail yacht on summer travel vacation; rich couple wealth generic

Hello Loving Mum

Oh, I really feel for you.

All you were trying to do was help your son, and it’s not only strained your relationship with him but is causing friction in your own marriage … and to top it off it’s cost you thirty grand!

So what do I think?

I think you should sit down with your husband and let him know that you agree it’s time you put yourselves first. After all, this is clearly eating you both up inside (a lot more than it is your son, or he’d be paying it off!).

I would also suggest to your hubby that the quickest way to get rid of this ugly angry feeling is to forgive the loan and move on – not for your son’s sake, but for yours. After all, you’re still grandparents to his kids, and he’s still your son.

But never, ever loan him another cent.

The Guilty Golden Girl

Hi Barefoot,

I’m torn. My mum has been recently diagnosed with pancreatic cancer at age 66. She would like to set up a share portfolio for my four-month-old baby girl (her only grandchild). This is incredibly thoughtful. I’d like to accept wholeheartedly, but I know I’ll have to keep the account in my name and manage it for at least 21 years, and deal with the tax implications. What steps should I take to honour Mum’s wishes and set my daughter up while minimising my own personal admin and guilt?

Louise

Through a ‘children’s investment bond’ you can choose to invest in low-cost local and international index share funds.

Hi Louise

I’m sorry to hear about your mum.

But what she’s about to do for your daughter is going to create a lasting legacy for her.

I suggest your mum look into opening what’s known as a ‘children’s investment bond’:

The investment bond can be kicked off with a thousand bucks. Once she’s opened the bond, she can choose to invest the balance into low-cost local and international index share funds – and then let compound interest do its thing! Finally, your mum can nominate the age your daughter can get the goodies (say, on her 25th birthday).

Now, in terms of minimising your admin, investment bonds don’t require an annual tax return – even when they’re eventually transferred to your daughter – so there’s very little admin required. As for your guilt, I’d tell your mum that as the years pass you’ll encourage your daughter to add to her portfolio by doing jobs and perhaps even setting up her very own Barefoot Business.

Unplug Social Media

Hi Scott,

I live in constant fear that my 13-year-old son is being exposed to bad things on his phone. Last semester one of his friends was dacked at school and someone took a photo, and it worked its way around the school. He’s having severe mental health problems as a result, and the police have been contacted because the photo could end up in the wrong hands. I’m trying to teach him the dangers of social media, but I feel like a hypocrite as I’m constantly glued to my mobile phone, setting a very bad example for him. I really hate myself.

Leonie

This Thursday the Unplug24 campaign is encouraging people to disconnect from their social media for 24 hours to raise awareness of the harm it can cause.

Hey Leonie

You’re not alone. Everyone is dealing with this. Earlier this year I wrote about Wayne, who tragically lost his son Mac to a scumbag extorter on social media. It was the saddest column I’ve ever written.

To mark the first anniversary of Mac’s passing, Wayne has created a grassroots campaign that he’s calling Unplug24. On the 24th of October (this coming Thursday), he’s encouraging people to disconnect from their social media for 24 hours to raise awareness of the harm social media can cause.

So, will staying off social media for 24 hours change anything?

Well, that depends on you.

Personally, I unplugged from social media a few years ago – fully intending to get back into it (after all, I was told that to be successful I needed to be posting multiple times a day). However, I forgot to plug back in: I liked the freedom so much that I never went back.

And you know what?

I can tell you that I am genuinely happier for it … and so are my kids.

Cowabunga, Dude

Hi Scott,

Over three years ago you answered a question about my daughters following your ‘Jam Jars’ method. Well, I have a family update for you … we are still going strong with the jars, and both girls have just saved over $100 for their own skateboards. Cowabunga!

Jo

Jo’s girls saved up to buy their skateboards.

Hi Jo,

I love these photos – you can tell how proud they are of what they’re achieved.

Here’s the other thing you’ll notice: they’ll look after those skateboards a lot better than they would if Santa had pulled them out of his sack.

You’re building strong, capable women right there.

You Got This!

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.

Originally published as Barefoot’s advice to parents whose son squandered their $30k loan