Family Bank
A family bank is an internal facility that lends money to next-generation family members for ventures, education, or first-home purchases under documented terms. Done well, it accelerates entrepreneurship and teaches stewardship by treating loans as real obligations. Done badly, it becomes an opaque grant programme that cements entitlement.
The single most important design choice is to document the loan as if the borrower were external: written agreement, market or near-market interest rate, defined repayment schedule, collateral or covenants where appropriate, and explicit consequences for default. Loans without those terms are gifts with extra steps.
The application and review process should sit with a committee of senior family members and trusted external advisors — never with the parents alone. Loans funding ventures and education tend to produce better outcomes than loans funding lifestyle or asset purchases. Defaults, when they occur, should be reviewed openly across the family, not treated as private embarrassments.
Related terms
Deeper reading
Family Governance Voting Rights: A 4-Stage Next-Gen On-Ramp
A four-stage model, from observer to board principal, gives next-generation family members real governance authority through competency gates, accountability milestones, and independent-director anchors, while satisfying emerging CSRD obligations.
Next-Gen Financial Curriculum: A 5-Stage Roadmap by Age
Most wealthy families default to ad hoc financial education without a structured progression. This five-stage curriculum framework ties developmental readiness to governance rights, trust distributions, and investment committee access.
Next-Gen Internship Blueprint: A 12-Month On-Ramp
A stage-gated 12-month rotational framework covering investments, operations, governance, and philanthropy, with milestone checkpoints, independent evaluation, and governance entry rights tied to program completion.
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