Amazon, Chipotle and GoPro.These household-name businesses were launched thanks to investments by the founders' parents. But parents have also sunk plenty of money into their offsprings' doomed enterprises, sometimes endangering their retirements and family relationships in the process.
New York certified financial planner Jon Ten Haagen, had a retired client who against his advice gave $100,000 - most of her savings - to her son to start a restaurant. The business failed within a year, and he has yet to pay any of the money back, he says.
"She's just getting by at this point," Mr Ten Haagen says.
So, how can parents help out in a way that ensures they do not lose out?
DON'T OFFER MONEY YOU CAN'T AFFORD TO LOSE
Parents usually want their children to succeed, and many are accustomed to sacrificing to help make that happen. But parents should not be mislead about the risks, financial planners say.
"This investment is going to be concentrated, illiquid, and with high risk of total loss," says Hui-chin Chen, a CFP in Virginia in the US. "If it fits in the parent's portfolio and does not jeopardise their retirement, then it's something both sides may consider."
Parents whose finances cannot withstand losing the money should focus on providing other kinds of support, such as helping draft a business plan or pointing them to the nearest Small Business Development Centre.
INSIST ON A PLAN
Speaking of business plans, make sure your child has one before any money changes hands, says Douglas Boneparth, a CFP in New York. The plan should include details such as the target audience for the business, what competition exists, expected setup and ongoing costs and when the business is likely to be profitable.
"You want to know when you can expect a return, even if it's just knowing your child will be successful," he says.
Good plans require considerable research and effort, so your daughter's or son's willingness to do this footwork can be an indication of whether he or she is entrepreneurial enough to run a business, Mr Boneparth says.
DEFINE YOUR ROLE
Will you be an investor in the company or a lender? Will you have a say in how the company operates? If the business succeeds, will you share in that success with a slice of the profits or the ability to sell your stake?
Parents who are going to be investors or partners should ask for a formal operating agreement that outlines financial contributions, voting rights, rules on making decisions and how people will join or leave the company. Operating agreements are a normal part of setting up a limited liability company, which also can help protect the parents' assets from lawsuits and other problems created by the business.
Many business founders, however, don't like being told how to run their business and may have a hard time answering to shareholders or investors, Ms Chen says.
"In this case, they need to answer to their parents, which can be even more problematic," she says.
Ms Chen has advised clients to instead structure monetary help as a loan, with interest rates applied that meet taxation guidelines in the country the business is based. Parents always have the option to forgive the loan later.
Those who want to minimise parent-child tensions may opt to skip the loan and make an outright gift. Most may not have to worry about gift taxes. In the United States, for example, people can give away over $11 million during their lifetimes before taxes might be owed. But gifts larger than $15,000 per recipient per year trigger a requirement that the giver file a gift tax return.
WHAT ABOUT THE OTHER KIDS?
Parents should also consider family dynamics if there are siblings, since helping one child can foster jealousy in the others. Those "Mum always liked you best" rivalries can tear families apart.
Parents don't have to make equal distributions to each child, but may want to consider accounting for money in their wills or other estate plans. If a loan is not paid back, for example, it could be deducted from that child's inheritance, says Steve Branton, a CFP in San Francisco.
Resist the urge to keep the arrangement a secret, advises Megan Ford, a financial therapist at the University of Georgia and past-president of the Financial Therapy Association. Engage the other siblings early in the decision-making process to discuss their feelings and concerns, she advises.
"A common tactic families use to sidestep conflict is avoidance, but transparency and communication is key to avoiding resentment within the family," Ms Ford says.
Liz Weston is a columnist at NerdWallet, a financial planner and author of Your Credit Score
The specs: 2019 GMC Yukon Denali
Price, base: Dh306,500
Engine: 6.2-litre V8
Transmission: 10-speed automatic
Power: 420hp @ 5,600rpm
Torque: 621Nm @ 4,100rpm
Fuel economy, combined: 12.9L / 100km
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The five new places of worship
Church of South Indian Parish
St Andrew's Church Mussaffah branch
St Andrew's Church Al Ain branch
St John's Baptist Church, Ruwais
Church of the Virgin Mary and St Paul the Apostle, Ruwais
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
The Bio
Hometown: Bogota, Colombia
Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves in Abu Dhabi
The one book everyone should read: 100 Years of Solitude by Gabriel Garcia Marquez. It will make your mind fly
Favourite documentary: Chasing Coral by Jeff Orlowski. It's a good reality check about one of the most valued ecosystems for humanity
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Messi at the Copa America
2007 – lost 3-0 to Brazil in the final
2011 – lost to Uruguay on penalties in the quarter-finals
2015 – lost to Chile on penalties in the final
2016 – lost to Chile on penalties in the final
if you go
The flights
Air Astana flies direct from Dubai to Almaty from Dh2,440 per person return, and to Astana (via Almaty) from Dh2,930 return, both including taxes.
The hotels
Rooms at the Ritz-Carlton Almaty cost from Dh1,944 per night including taxes; and in Astana the new Ritz-Carlton Astana (www.marriott) costs from Dh1,325; alternatively, the new St Regis Astana costs from Dh1,458 per night including taxes.
When to visit
March-May and September-November
Visas
Citizens of many countries, including the UAE do not need a visa to enter Kazakhstan for up to 30 days. Contact the nearest Kazakhstan embassy or consulate.
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
Company profile
Name: Fruitful Day
Founders: Marie-Christine Luijckx, Lyla Dalal AlRawi, Lindsey Fournie
Based: Dubai, UAE
Founded: 2015
Number of employees: 30
Sector: F&B
Funding so far: Dh3 million
Future funding plans: None at present
Future markets: Saudi Arabia, potentially Kuwait and other GCC countries
First Person
Richard Flanagan
Chatto & Windus
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The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
UAE jiu-jitsu squad
Men: Hamad Nawad and Khalid Al Balushi (56kg), Omar Al Fadhli and Saeed Al Mazroui (62kg), Taleb Al Kirbi and Humaid Al Kaabi (69kg), Mohammed Al Qubaisi and Saud Al Hammadi (70kg), Khalfan Belhol and Mohammad Haitham Radhi (85kg), Faisal Al Ketbi and Zayed Al Kaabi (94kg)
Women: Wadima Al Yafei and Mahra Al Hanaei (49kg), Bashayer Al Matrooshi and Hessa Al Shamsi (62kg)
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
UAE currency: the story behind the money in your pockets
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
Andor
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The biog
Name: Dhabia Khalifa AlQubaisi
Age: 23
How she spends spare time: Playing with cats at the clinic and feeding them
Inspiration: My father. He’s a hard working man who has been through a lot to provide us with everything we need
Favourite book: Attitude, emotions and the psychology of cats by Dr Nicholes Dodman
Favourit film: 101 Dalmatians - it remind me of my childhood and began my love of dogs
Word of advice: By being patient, good things will come and by staying positive you’ll have the will to continue to love what you're doing
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
RESULTS
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