What Do You Do When Friends or Family Ask You for Money?

by Jessica Sommerfield · 8 comments

friends and family money
One of my relatives asked me for money a few times in the past. The first time, he said he needed money for a security deposit on an apartment; the second time, he said the money was for groceries. Both times, he played up the situation to pull on my heartstrings: he needed his own place so he could get custody of his daughter, or he was literally starving and had exhausted alternative resources.

I caved and wired him cash. If the cash helped him out, I wouldn’t think much more of the situation. But the reality is that he’s someone who consistently mismanages money, fails to keep jobs long-term, and makes poor life decisions. He lied about where the money was going and never did get that apartment. I also suspect he used the food money to purchase cigarettes and alcohol. By now, I fully realize that giving money to him is like throwing it into a black hole.

Situations like these make you think twice about giving money to friends and family. It’s often a mental struggle because you want to help someone, yet you wonder how giving or not giving will affect the both of you, financially and relationally. Some people say the solution is to never give cash to relatives or friends, but I don’t think it’s always that black-and-white. It’s a hard and very personal decision that will vary with each situation. These guidelines can help though.

when family and friends ask for money1. Be Clear and Consistent With How You Handle Cash Gifts

My relative didn’t lie the next time he asked for cash, as it was for a cell phone. I told him no and that I didn’t consider it a need. He was angry with me for a while, yet he hasn’t asked for money since. In this situation, it would have helped if I’d been more clear and consistent up-front with my yeses, noes, and reasons for them.

You may want to specify that you’ll only help with certain types of expenses or say no across the board, regardless. The important part is to stick to the plan though. If others know your policy on cash gifts and the non-arbitrary, non-personal reasons behind it, there’s less room for hurt feelings or manipulation.

2. Be Aware That Giving Money May Lead Others to View You as the Family Bank

In some families, when word gets around that you gave so-and-so cash, you’ll have a line of others looking for the same. It’s annoying when people assume you have limitless resources or play the equal treatment card, but it’s important not to make anyone feel as if you don’t care about their needs. If you suspect members of your family will react this way, it’s a strong argument in favor of keeping a clear-cut “no cash” policy.

3. If Someone Can’t Be Trusted With Cash, Pay for Things Directly or Offer Non-Monetary Help

Giving my relative cash will never help (unless he learns better financial management). But that doesn’t mean I can’t help in any way —even financially. If your relative is going through a true financial crisis, and you don’t want to see them homeless or starving, one solution is to pay for their bills, rent, car repairs, deposits, or groceries directly. Offering non-monetary help (job-searching, taking them to work, driving them to an interview, etc.) is another good way to help people who haven’t yet learned to handle cash responsibly.

4. Never Consider It a Loan. It’s Always a Gift

A Lending Tree survey with 1,000 participants showed that only 51% of money lent to family members or close friends is ever paid back. Why allow relationships to become strained or even ruined by unspoken feelings of resentment? There are ways to lend money to relatives responsibly, but I think it’s better to consider it a gift (even if they promise to pay you back). Make sure there are no unconscious strings attached: don’t expect anything in return, whether monetary or otherwise. A simple “thanks” should do.

5. Make Sure You’re Not Hurting Your Own Financial Goals

If you’re generous by nature, it might be tempting to give until it hurts, but helping someone else should never compromise your own financial security, either now or in the future. Unfortunately, many older adults have neglected their retirement savings as they’ve gotten caught up in helping their adult children. Only when you’ve taken care of yourself are you in the position to continue to help those you love.

6. Learn From Your Mistakes

The experiences of giving money to my relative taught me to be less gullible, more clear and consistent with my giving policies, and be free from resentment regardless of how someone uses the cash I give them. If you’ve made mistakes when giving cash, do your best to assess what went wrong and be smarter about it the next time around.

Is it your policy to give cash to family and friends, or do you avoid it entirely? How does it work for you?

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{ read the comments below or add one }

  • Striving Millennial says:

    It’s hard for me to treat it as a gift. I’m the type of person who always pays back the money I owe, no matter how small it is. So if you tell me you’re going to pay me back, I expect that I’ll get my money back. But if you don’t have the capacity to return the money, then tell me upfront. I’m willing to help you in other ways. I can give you some money, the most I can afford. Need a job? I’ll refer you to people I know. All I want is some honesty.

  • Accidentally Retired says:

    Yes, I think the key part in all of this, is that is has to be a gift. Period.

    The only time we ever had to get involved with helping family was when my sister-in-law was going through financial hardship after being laid-off and unemployed for nearly a year. She needed a few hundred to help her bridge the gap to a new paycheck.

    This was early in our careers before we had a lot of money so a few hundred was a big deal. We thought she might pay it back when she could, but we realized that it wasn’t worth it and made a mental note that it was indeed a gift. We helped her out and I hope she would do the same for us if we ever needed it!

  • gwendolyn filardi says:

    When relatives ask for money and I give it to them, it is with the intention that the money will be repaid (knowing there is a high risk that it won’t). My caveat to them is this: please don’t ever ask me for any more money until you pay back what you owe! So you may never see the original money you gave away, but the relative probably won’t ask again.

    • Caroline says:

      That is excellent! It’s helpful to the person in need, but it sets a very clear boundary to limit the endless wheedling that can sometimes end up happening in these scenarios.

  • VIRGIL says:

    I did just that….for years helped and gave money to my sister and her husband…..like 2 full blood parasites,when I stopped giving them money (substantial amounts) they started tormenting our mother and in the end sued us…..2 lawsuits….expensive, lawyers…..they lost….still appealing…

  • Arminius Aurelius says:

    Oh , yes this is all too common . I have a very good friend who owns his own business , both he and his wife work and yet one day he asked me for a loan . I do trust him 100 % but obviously neither he nor his wife know how to budget money. . I felt bad but I also am no fool. A number of times in my life I worked not only a 40 hour week but also had a part time job , 4 hours a day , 5 days a week. , total of 60 hours . I tell kids by working another 4 hours a day , you increase you wages by 50 % . The problem also is they get into Credit Card debt and end up paying 18 % to 24 % interest . [ big screen T.V. , often dinner out and the latest toys. What Fools Ye Mortals Be A Fool and his money are soon parted

    • steveark says:

      Nobody in my family would ever ask anyone for money. They were millionaires with no need for help. My kids aren’t millionaires yet but they’d never ask for help either unless it was life or death. That is how we raised them. Most of my friends are millionaires and have no financial concerns. We do help strangers when we see a need, but they don’t come ask us, we go and ask them if we can help. And never a loan, only a gift.

  • Jason says:

    I would say to make it a loan, offer very little, and not expect to be paid back. That way if they ask about money again, you can tell them that their current credit rating with you is zero, and they should try a bank.

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