Tips for Loaning Friends and Family Money

When it comes to loaning family members money, it can be a sticky situation for all the parties involved. Especially when you’re the oldest sibling of the family, like I am.

I feel somewhat responsible for the lives and financial well-being of all my brothers and sisters (and their kids). When I’m not getting asked for financial advice, I’m getting asked for money.

Here are some simple tips I’ve learned when loaning friends and family money.

Make a firm decision

If you don’t want to loan someone the money, or you’ve had a bad experience with them in the past then just don’t do it. No one should force you into a decision with your money that you aren’t comfortable with. If your answer is yes, then treat it like a calm business transaction, but if the answer is no, then be kind but firm about it.

Set conditions or guidelines

Sometimes I don’t mind loaning or giving my friends or family money, but only with certain conditions (like if they need the money for food, it has to be used for that purpose). If they don’t want to accept the conditions, then they don’t have to accept the money. It’s just that simple.

Barter or ask for an exchange

Not everyone can pay back the actual cash but maybe they have something else to offer. Ask for something in exchange, like yard work, cleaning or babysitting. Bartering is a good way for each party to get something out of the transaction, in a peaceful manner.

Remember what’s important

Many times, loaning money to a relative can create a lot of tension and stress. I’ve experienced strain on relationships within my family over $20, and to me that’s just not worth it. It’s important to focus on what really matters, the relationship with the person and not the money. You might not ever see the money again, but it’s better to forgive the debt than lose a good relationship.

However, in the end money and family don’t mix well. In the spirit of fairness, you might just want to say no when people ask to borrow cash, or just choose to give them the money instead of loaning it. There’s no need to feel guilty about your choice either way.

I try to keep my family, friends and their needs in perspective. I am willing to help them, but I’m not supposed be bailing them out all the time. They’re adults with their own lives and families, and they are responsible for the decisions (and consequences) they make, just like I am.

Do you loan your friends or family money? Why or why not?

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