Is lending money to family always the right thing to do?
Consider the case of Eric, a 33-year-old who is debt-free, owns his own business and lives comfortably after years of hard work and risk-taking. When his 29-year-old sister recently asked him to cover a few months of her rent, he said no.
Don’t miss
- I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
- Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
- Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
It wasn’t because he couldn’t afford it. It was because he’d done it before.
Still, Eric insists the decision isn’t about greed. It’s about boundaries.
Lending money to family: What could go wrong?
According to Lending Tree, 35% of Americans who lent money to family or friends reported negative consequences. These include hurt feelings (14%), decreased contact (11%) and resentment (10%).
Lending to family can also blur emotional lines. It’s one thing to help someone in a crisis. But if there’s no plan for repayment or accountability, it can easily lead to resentment.
A short-term favour can quickly shift the family dynamic and turn one sibling into a provider and the other into a dependent.
Read more: You don’t have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here’s how
Financial help doesn’t equal financial handouts
Saying no to lending money doesn’t mean saying no to helping. Some forms of support can be more beneficial in the long run. Here are a few alternatives that might empower your sibling more than a temporary bailout:
Offer to review their budget: Sometimes, all it takes is a fresh set of eyes to spot where money is going. Instead of offering cash, propose working together toward a goal like building an emergency fund.
Help them apply for jobs or update their resume: A part-time job might not cover everything. Offer to help update their resume, practice for interviews, search for better opportunities or tap into your network on their behalf.
Help them explore debt consolidation: If they’re overwhelmed by bills, consolidating the debt into a single, lower-interest payment might help them catch up.
Set boundaries with conditions: If you choose to help in the future, consider setting clear expectations, like one-time assistance, partial repayment, or proof of an action plan.
Connect them with a financial advisor or credit counsellor: If the situation is complex, a professional can offer tailored advice and help them build a sustainable plan to get back on track.
There’s another often-overlooked cost: your peace of mind. Financial boundaries are just as important as emotional ones, especially when you’re working hard to maintain your own stability.
Prioritize your financial stability
Eric’s situation is a reminder that being financially stable doesn’t mean being responsible for fixing other people’s problems. Saying no to a loved one can be hard.
But it can also be the first step toward healthier boundaries and long-term solutions.
Whether his sister agrees is uncertain. But Eric’s stance is firm — not out of coldness, but out of care. He wants her to thrive on her own terms, not just get by on someone else’s dime.
What to read next
- Financial aid only funds about 27% of US college expenses — but savvy parents are using this 3-minute move to cover 100% of those costs
- Here are the 6 levels of wealth for retirement-age Americans — are you near the top or bottom of the pyramid?
- Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
- How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Money doesn’t have to be complicated — sign up for the free Moneywise newsletter for actionable finance tips and news you can use. Join now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Related Posts
