PenPenWrites

Here's how the father put it: “It was an investment my wife and I made because we think that’s what parents do. Parents help their children.”

The father happened to be Nathan Deal, who is running for governor of Georgia. He and his wife lent their daughter and son-in-law $2 million to open a sporting goods store. Then they doubled down by guaranteeing bank debt worth another $2 million.

The investment soured; the store failed. And because Deal was in the middle of a campaign, all the facts about his big bet on his offspring became public knowledge. The daughter and her spouse have filed for bankruptcy; Deal and his wife are scrambling to avoid that particular ignominy. The losing investment was used against him in the campaign–as a challenge to his fiscal competence.

The road to helping our children financially is pocked with pitfalls. It's hard to  turn down a grown child who has a good idea for setting themselves up in a good business–especially if we can afford it. 

And perhaps that's the underlying point here. As Ron Lieber of the New York TImes points out in article he wrote on the matter, the first principle of financial planning is this: "Never invest more than you can afford to lose. The Deals may well avoid bankruptcy by cashing out retirement accounts and selling one of their homes and other land. But they clearly stretched the definition of “afford” in this instance."

The other principles include checking out the business plan and asking the same questions of your children that you would of any business you were thinking of ivnesting in. Another tip: invest in phases. That can instill discipline.

Given the financial perils Deal and his wife now face, Lieber's final line is worth remembering: "Nobody should ever put themselves in this position if they can possibly help it, no matter how much they love their children."