'My daughter needs €100,000 to save her start-up. Should I help?'

Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com

Dear Luca, 

I am almost 65 years old, retiring this year, and have enough funds to live comfortably and ensure that my children have a solid basis as well.

I thought I would face several dilemmas at this stage in life, but none are similar to the one I am experiencing right now with my daughter's startup business.

My 30-year-old daughter launched an AI-focused business three years ago.

I have no understanding whatsoever of this kind of business, but she had a high level of hype and success these past years. She was awarded several grants and even left her stable full-time job to push this business further.

But now, in the third year, the startup is facing unexpected funding issues and my daughter is in a difficult position. A few days ago, she asked me for €100,000.

My motherly instinct is to give it to her, because I can afford to. I mean, it's not like I'm funding something unnecessary, like a new car, which devalues the moment it’s out on the road.

However, I am in a dilemma, because the money might not solve the problem completely. And apart from that, it also represents a large chunk of what I had always intended to leave my children one day.

I have nothing but admiration for what she has created and everything she has been through. But I fear that if I help her now, the money may simply disappear into a business that was never going to make it, and I will have lost both the funds and watched my daughter fail regardless.

Proud But Worried Mother

Luca responds:

You raised a daughter who managed to build something from nothing, who won grants, and took the ultimate leap of leaving her full-time job to dedicate all her energies to her dream, her start-up. And now, she needs you to sustain that dream.

I'm a parent. My first instinct is always to help my children whenever they are in need. And when I decide not to, because it’s for them to mature better, it is still difficult to reduce that parental guilt.

€100,000 is a significant amount, and I don’t blame you for being concerned. The risks you mention are real, and it would be wrong of me to dismiss them.

There is nothing more painful than watching someone you love fail - except perhaps having funded that failure yourself, and wondering whether your money prolonged the inevitable rather than prevented it.

But taking you away from this for a second, there is also the factor that if you do fund her, at the back of your daughter’s mind there will always be the thought that help is always available no matter what. That could incline her to take even more risk than necessary. Sometimes, too much financial protection can quietly remove the urgency that businesses need in order to become sustainable.

And here is where I relate as well. In my own entrepreneurial journey, some of the biggest lessons came when I realised that no one was coming to save me if things went wrong. It forced me to become more disciplined, more calculated, and more responsible with risk.

The fact that you are inclined to help because you want to see her succeed in the business, because as you said 'It's not like I'm funding an unnecessary objective, like a car' is understandable and comes from the right place.

However, your daughter must learn that your help is not an open cheque. I would still encourage you to help her - but with structure, like for example loaning her the money, with little or no interest. That way, the fact that she has to repay you will make her more responsible for the funds she borrowed.

You also mentioned that she was awarded grants. That means that she must have a good business plan, which could be presented to a bank that could loan her the amount needed if the business idea is viable.

Another method might be crowdfunding, or even, as difficult as this might be for her, seeking investors. That might mean losing equity in the company, but it also brings an injection of funds which can save the start-up’s future.

As you can see, there are many options rather than just giving her the money outright. Start-ups often require significant funding in their early years before becoming stable. Your daughter understands this, and she will, for sure, understand that at your age you want to safeguard your hard-earned money as much as possible, both for your sake and for hers.

I hope this helps.

Luca is the founder of the Money Coaching Hub. Email him your financial questions or your response to today's question for a chance to be featured in a future column.

Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.