It’s pretty hard to feel bad for billionaires, but according to a host of incredibly wealthy people there’s one aspect of being filthy rich that is no fun at all: deciding what to do when friends and family ask you for money.
How do those who can afford almost anything choose how to respond when someone they love comes looking for cash? Is there a way to balance a desire to help with a need to keep financial ties from spoiling your relationships? Shark Tank investor Kevin O’Leary recently talked about how billionaires think through these requests on a podcast.
His words offer a peek into the hidden world of the super rich. But according to financial planners, they suggest a framework regular people can use to think through how and when to offer financial help to loved ones too.
Being rich has one big downside
Before we get into O’Leary’s comments, let me take a moment to try to convince you that the ability to cut a huge check to loved ones is actually a problem. Having nearly limitless resources has tremendous upsides, but several very wealthy people have spoken publicly about how being a potential piggy bank to everyone you meet can spoil relationships.
Bill Gates, for instance, told The New York Times how relieved he was that his daughter didn’t ask him for money when she was fundraising for her (now scandal-plagued) e-commerce startup.
“I would have kept her on a short leash and be doing business reviews, which I would have found tricky, and I probably would have been overly nice but wondered if it was the right thing to do. Luckily, it never happened,” he said.
He wasn’t the only Gates parent concerned that mixing money and family would end badly. His ex-wife, Melinda French Gates, also didn’t invest, stressing that financial handouts rob kids of learning opportunities. “She’s growing from this,” French Gates explained.
Jay-Z is reluctant to hand cash to family. He once started a mini online firestorm when he said he wouldn’t give his cousin $4,800 to start a business.
“It don’t work like that, man,” the rapper and all-around mogul insisted. “You gotta explain to him life isn’t like that.”
The loan would have killed the cousin’s hustle. It apparently also killed the good vibes between them. “You going home for solace, you want family, you’re going home for peace of mind,” Jay-Z said.
Kevin O’Leary’s rule for giving away money
VC Morgan Housel once summed up the problem of handing your loved ones (especially young loved ones) money this way: You either “ruin their ambition with inheritance, or risk some form of strife by denying them an easy life.”
On the Fifth Column podcast, O’Leary agreed. When asked what was the worst part of being a rich guy, the investor replied: “It’s your own family hitting on you for money, and it’s extremely difficult.”
He continued, “Many people in your family will approach you and they will say, ‘I don’t want you to give me money. I want you to invest in my idea, and I want you to give me this for that, or I want to start a bowling alley or a restaurant or a business or whatever it is, and I’ve seen it all. In the beginning, you will feel the guilt of success and you will give them money, and you will slowly destroy your relationship with those people, and you will have horrible Thanksgivings.”
That’s why O’Leary developed a rule to save his relationships (and his Thanksgivings). When someone comes to ask him for, say, $200,000 for whatever scheme or investment, he replies, “‘Look, I’m going to give you the $200,000. I don’t want to be paid back. It’s a gift, but I never ever want you ever to ask for money from me again, ever.’”
He explained, “I want to have Thanksgiving dinner and talk about family, not money. I’ve watched how bad money can screw up a family because [of] loans all over the place, you’re trying to get back money from your brother-in-law. That’s insane.”
As Business Insider recently noted, O’Leary’s simple “one-time gift rule” has inspired other wealthy people to adopt a similar framework.
A lesson for non-billionaires, too
Obviously, 99.9% of people reading this are not going to share this exact billionaire problem. But that doesn’t mean those of ordinary means have nothing to learn from the struggles of Kevin O’Leary and his fellow billionaires.
Even if your investment in a loved one’s business is much more modest than a Bill Gates-size check, it still means you have to decide how much to get involved in day-to-day operations. The likely result will be strife. Hounding your brother-in-law to pay you back stresses your relationship whether the loan is for $200,000 or $200.
That’s why at least some financial planners insist that flat gifts to assist with major life events, like contributing to tuition or a down payment, are often a wiser way to share your financial success with loved ones than a loan or investment.
“If you’re a parent (or grandparent, or very kind aunt or cousin) who is fortunate enough to have the money to help your family, where should you start? Given the complexities and risks, I believe you should avoid funding a loved one’s business,” wealth planner Neil Torney advised in the Financial Times, for example.
So while you probably have fewer people hitting you up for lower amounts, you can still consider applying O’Leary’s one-and-done rule for financial assistance. Loans and investments with family are a minefield at any income level. A flat one-time gift might be a better bet. And if you can’t afford to make it a gift, maybe consider saving your Thanksgivings and make it a no.
—Jessica Stillman
This article originally appeared on Fast Company’s sister website, Inc.com.
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