Many wealthy families have a strong entrepreneurial spirit. Perhaps the wealth began with an individual who built a business from nothing and that empowered and inspired future generations. Or perhaps the family is just filled with creative minds and strong business acumen. Whatever the case, there are things you can do financially to fuel the entrepreneurial spirit in your family—and improve your family’s financial profile (and overall happiness) in the process.
Instead of just passing down money or investing in a family member’s business idea, one of the more interesting financial options available is setting up a family bank. A family bank is a formal legal entity that has established rules on how family members can borrow funds to support business ventures, and how those loans are expected to be paid back.
Family banks offer a few key benefits:
- Accountability – Rather than being a hand out, the family bank works in many ways like a traditional bank—requiring those receiving a loan to have a plan for success and repayment in order to borrow money. You can’t just take the money and run.
- Creativity – By making this resource available to various members of the family, the family bank encourages individuals to fully develop their business ideas and be self starters. It provides a means for pushing new business ventures that can benefit the whole family.
- Impartiality – When it comes to family, there is often a lot of emotional baggage involved in financial decision-making. A family bank helps remove some of that from the equation by having a clear set of rules in place that apply equally to everyone.
Setting up a family bank can help both stokes the embers of entrepreneurship for generations to come in your family—and, ideally, serve as a continuous stream of new wealth long into the future. Download the resource below to learn more about whether a family bank might be a good fit for your family.
*One thing to keep in mind if you’re considering setting up a family bank, you may need a financial expert to help advise and assist you along the way. Contact Trove Private Wealth™ today if you have any questions—we’d love to help you answer them.
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