All NewsSeptember 26, 2026

Suze Orman warns parents about funding a kid’s business

Saying “yes” to your kid is one of the best feelings in parenting. Saying it by spending money you will need at age 70, however, can have expensive consequences.

The request usually sounds reasonable. Your son or daughter has a plan, a name for the business, and a spreadsheet, and all they need is some seed money to quit their day job. It feels like exactly the kind of bet a good parent makes.

Plenty of families are having that talk right now. Americans filed 531,728 business applications in August, according to the Census Bureau, and 59% of parents with children aged 18 to 34 offered them financial help in the prior year, a January 2024 Pew Research Center report found.

The instinct is to help, and in many families, it should be. The harder question is where the money comes from, and what it costs you and your child 20 or 30 years from now.

Suze Orman, personal finance author and host of the “Women & Money” podcast, just drew a hard line around that question.

When I ran her suggested rules through the numbers, the cost of ignoring them turned out to be far larger than the check itself.

What Suze Orman told parents about funding a child’s business

Parents and grandparents should “not offer financial assistance unless you are 100% sure you can afford to give that money,” Orman wrote in a Sept. 17 post on SuzeOrman.com.

That test covers loans as well as gifts. “Remember, a gift (or even a loan) needs to be generous to the giver as well as the recipient,” she wrote.

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Orman ruled out three sources of cash for parents: your emergency savings, your own retirement contributions, and money set aside for goals such as long-term care insurance.

She opened the post by pointing to a survey showing most Gen Z and Millennial adults want to run their own business, and said the pull to “control their destiny” makes sense. “But it has to make financial sense, too,” Orman wrote.

Suze Orman says parents should only fund startups with money they can afford to lose.

MoMo Productions / Getty Images

Suze Orman’s 3 rules for adult kids starting a business

Then Orman turned to the young entrepreneurs themselves, with three rules from the same post.

On health coverage, she didn’t soften it. “I don’t care how young and how healthy someone is. One serious accident will be a financial disaster without insurance,” she wrote.

Related: Family Vacation Fight: Should Parents Still Pay for Their Adult Kids?

Her reasoning is about stacking risk.

“Starting a business is risky enough. No one should pile on more risk by taking on additional financial risk, whether it be depleting their retirement savings or running up expensive credit card debt,” Orman wrote.

What cashing out a 401(k) really costs a young entrepreneur

I started with Orman’s first rule, because a 401(k) cash-out looks cheapest on launch day and costs the most later.

Say you’re 30, still drawing a salary in the 22% federal bracket, and you cash out $50,000 to fund the launch. Withdrawals before age 59½ generally carry a 10% additional tax, according to the IRS, which is $5,000. Federal income tax takes another $11,000, and state tax comes on top of that.

That leaves about $34,000 for the business. Left invested at a 7% average annual return, the same $50,000 would grow to roughly $611,000 by age 67.

A 401(k) loan is the gentler option when your plan offers one. Plan loans are generally capped at $50,000 or half your vested balance, whichever is less, and must be repaid within five years, according IRS loan rules. A loan that isn’t repaid is taxed as a distribution.

How much a parent’s 401(k) pause costs by retirement age

Orman’s rule for parents targets a quieter version of the same trade, which is cutting your own contributions to free up cash.

The 2026 401(k) contribution limit is $24,500, plus an $8,000 catch-up for savers 50 and older, according to the IRS. Savers aged 60 to 63 get a larger $11,250 catch-up.

Picture a 52-year-old who maxes out, then pauses for two years to bankroll a child’s launch. That’s $65,000 not saved, and at 7%, it would have grown to about $173,000 by 67, before accounting for any employer match.

In my analysis, that is the part families miss. The gift feels like a one-time check, but the bill shows up in retirement, when you have the fewest ways to earn it back.

Credit card debt, skipping health insurance costs business owners more

Orman’s 22% warning matches the market. The average APR on new card offers is 22.17%, and store cards average 33.13%, according to WalletHub.

Put $25,000 of startup costs on a card at 22.17% and pay it off over three years, and you’ll pay about $9,451 in interest on a $957 monthly payment. Stretch it to five years, and the interest climbs to about $16,573.

Health insurance isn’t cheap, either. The average 2026 marketplace deductible reached $3,786, up 37% from 2025, according to KFF. That is still a known cost with an annual out-of-pocket cap, which is the trade-off Orman wants business owners to make.

The case for buying a business instead of building one

Not everyone in personal finance sees caution as the default. Codie Sanchez, who sells business-buying courses through her company Contrarian Thinking, argues in her Sept. 18 book “Own or Be Owned” that buying an existing business beats starting one.

“If your business still requires your constant input and your final say, you don’t own a business. You own a job with more risk,” Sanchez said in the book’s launch announcement.

TheStreet has already examined her buy-rather-than-build case. A business with cash flow answers part of Orman’s worry, but buying one still takes money up front, and that money tends to come from the same accounts Orman told families to leave alone.

What to do before you fund your kid’s business

Start with Orman’s test. If you couldn’t hand over the money and never see it again without pushing back your own retirement date, the amount is too big.

If you’re 50 or older, protect your catch-up contributions first. Orman has made the same point about adult kids who move back home, and the business version is the same trade with a longer payback.

Help in ways that don’t touch your nest egg. Orman suggests your child spend “a few years saving up” for living costs and health premiums before launching, and live at home if it works for your family, while still chipping in on household costs.

Some parents can afford an outright gift, and for them, Orman’s rule is a green light.

“Think I am being too careful? Just the opposite. My advice is designed to increase the chances of success,” she wrote.

Keeping your retirement out of the funding plan is part of what gives your child’s business a fair shot.

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