Keep it in the family

Pooling funds can open financial doors … or ruin relationships. Consider the pros and cons before making such an important commitment

- HELEN BAKER

Investing with family is not a new concept. Indeed, huge numbers of Australians have some form of investment jointly owned with relatives.

The benefits of investing jointly with relatives include:

• Capitalising on economies of scale to purchase bigger assets for bigger returns;

• Giving singles, young people and lower income earners a foot in the door;

• Drawing on collective wisdom to make decisions;

• Tax benefits, provided your set-up is right; and

• Building a legacy and keeping assets in the family. As with everything in life, though, there are drawbacks, too. Investing with family can:

• Impact relationships if there are financial or strategy disagreements;

• Reduce the family support available to fall back on should investments go sour;

• Become overly complex having multiple households involved;

• Allow emotions to override rational decision-making; and

• Cause financial discussions to take over what should be quality family time.

Furthermore, the pros and cons of investing with family differ depending on the type of assets you invest in and the structure you use to manage those investments. So, it’s worth looking at the merits of each individually before making any decision to pool your funds.

1 Property

Australians love property, with billion of dollars lent to investors each year. There are numerous ways families do this together, some with financial drivers and others borne out of necessity. Many parents, for example, contribute funds to help their children onto the property ladder, either as a loan or with the aim of splitting profits once the property is sold in future.