If you MUST lend money to friends and family, try to keep these 7 essential tips in mind.

The common advice about lending money to friends and family is pretty straightforward: don’t do it. It’s generally said that if you’re going to give away money to the people you care about, it should be in the form of a gift. The expectation of repayment can lead to resentment, guilt and the general dissolution of relationships — so why expect anything at all?

But unfortunately, real life isn’t always so straightforward. Sometimes a friend or family member desperately needs financial assistance, and the amount they need is just too much to part with permanently. It may not be an ideal situation, but it’s common enough to warrant discussion.

So how do you go through the fire of money lending and come out the other side with your relationships still intact?

1. Don’t let it affect your credit. It’s one thing to loan your sister $500, but it’s another to cosign on her car loan. Cosigning means you could become responsible for her debt if she fails to pay it. No matter how much you trust someone, this is a huge risk to take — especially if you can’t afford to pay off a $20,000 Toyota. Your credit score can also take a hit if they fail to make their payments in a timely fashion.

2. Write it down. Miscommunication can turn a friendly loan into a relationship killer. What your brother considers to be timely repayment could be completely different from the time frame you’re expecting to wait. That’s why it helps to write the details out, so everyone is clear about the terms of the loan. You can also set up late fees so they have incentive to pay you back on time instead of a few days after the fact.

3. Keep a record of the repayment. If your friend or family member sets up a repayment schedule with you, find an online method to track how they’re paying you back. Splitwise is a great option, but there are plenty of other sharing and debt tracking services. This way, there’s concrete proof that each payment has been made. This is easier than getting separate checks in the mail or random amounts of cash.

4. Find out what the loan is for. Just like a bank wouldn’t loan you money without a stated purpose, don’t give your loved one money just because they ask for it. Maybe they want money to invest in what seems like a scam or a legitimate business venture – you won’t know until you find out. Plus, if they have to explain their reason to you, it may help them come to a better understanding of how reasonable their request is.

5. Discuss it with your partner. If you share finances with someone else, you should get their approval before you lend someone else money. Being on the same page will ensure that you don’t ruin your relationship with them as well as the person you’re lending money to.

6. Let them know they can talk to you. If you set a hard deadline and your friend can’t come up with the money by then, they may feel too embarrassed to talk to you about it. Don’t be a pushover, but let them know you’ll be flexible. This can make it easier to preserve your relationship, and your friend or family member won’t feel the need to give you the silent treatment out of embarrassment or fear.

7. Don’t turn the loan into a gift. While there are exceptions to this rule, you generally don’t want to change the nature of the transaction after the details are set. It may be preferable to give a gift rather than a loan, but voiding your right to repayment after the loan has been given can make you look like a pushover — and could lead to you resenting the person you’re giving the money to. No matter what you do, make sure your decision isn’t heavily influenced by a pushy friend or relative.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

If you’re struggling financially, is there ever a good way to ask your parents for help?

The idea of borrowing money from friends or family has always made me feel… gross. In all honesty, I’d rather be broke than deal with the icky feeling of owing someone money.

There’s something about introducing a financial transaction into a personal relationship that almost always ends up in some sort of discomfort — especially when parents are involved. One day, you’re the independent, successful adult you struggled so hard to become; the next, you’re once again that awkward sixteen-year-old begging for gas money.

But sometimes asking your parents for financial help is unavoidable. In fact, about half of college students expect their parents to support them financially for up to two years after graduation.

Plus, they’ve had years to grow their wealth while you’re still getting used to the idea of paying someone for running water.

So whether you’re struggling to find post-college employment and need to move back in for a while, or you’re a few thousand dollars shy of owning your first home, here’s how to navigate the tricky conversation of asking for financial help from Mom and Dad.

Decide if you need a gift or a loan.

Before you even broach the subject, determine exactly what it is you’re asking for. Depending on your mom or dad’s personality, you might be more likely to receive a loan than a handout. If so, figure out exactly how much you need to borrow, how long it will take to repay the loan, and whether or not you will also pay interest.

On the other hand, you might know very well there’s no way you will be able to pay the money back. Instead of making promises you can’t keep, be prepared to state your case as to what, exactly, you need and why your parents should be willing to make the investment. Which brings us to the next step.

Have a solid case to present.

You might technically be an adult, but in your parents’ eyes, you will always be their child. However, this is not a situation in which you want to be viewed as immature or childish. You need to appear prepared, confident, and accountable.

Have an action plan ready to present — write it down, review it several times, and believe in it. Talk to your parents calmly and explain your situation clearly. Be prepared to negotiate. And above all else, don’t get emotional or attempt to manipulate their emotions. It. Will. Backfire.

Don’t compromise your parents’ finances.

How to Ask Your Parents for Money

Some parents are willing to sacrifice everything to help out their kids, no questions asked. Others prefer to send their children through the School of Hard Knocks, even if they have to repeat a few grades.

If your parents are more like the former, be especially sensitive to how your request for financial assistance will impact their well-being. Will Mom have to dip into her 401(k) to cover your student loan debt? Is Dad planning to work a few more years so you can get back on your feet?

Ask yourself if you’re really okay with being the person who jeopardizes your parents’ golden years after they’ve worked so hard — for decades — to reach them. Yeah, didn’t think so.

Should you even do it?

Turning to the Bank of Mom and Dad can be tempting when you’re seriously short on cash. But there’s a host of potential landmines when you ask for money from the people who used to change your diapers.

Consider whether you’re looking to your parents for financial support because it seems easy or because that’s really your only option.

There’s nothing wrong with getting help from Mom and Dad if they’re willing. But it’s almost always best to suck it up and figure it out on your own if you can. After all, they’ve already made the biggest investment in you anyone ever will. They raised you.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Always coming up short when you’re out. Never paying their fair share. What do you do when you’re always covering?

We’ve all had that friend. You know the one.

When the dinner bill comes, they severely underestimate their share (let alone account for tax and tip). You spot them $10 here and $20 there, yet they always “forget” to pay you back.

But you let it slide every time. After all, what’s a few bucks among good friends?

That used to be your attitude, anyway. Lately, your desire for a person’s company has a perfect negative correlation to how much of their crap you are required to put up with. You are, in fact, too old for this shit.

So here’s how to deal with that friend who makes you feel more like a bank than their buddy — without killing the relationship.

Be honest.

The great thing about friends (real friends — not the people you pretend to like out of various social obligations) is that you can tell them the truth and they’ll still be your friend. You’re not doing anyone any favors by pretending your pal’s poor money etiquette doesn’t bother you.

So the next time they leave you hanging with the bill, be up front and tell them how much they owe right then and there. Add that you’re pretty strapped for cash as well and can’t afford to cover them. Consistently push back rather than ignore the behavior and eventually, they’ll get it.

And if this honesty does cause a rift in your relationship, it’s probably time to reevaluate whether you two shared a real friendship at all.

Find cheap/free things to do.

A novel idea, right? As much as you’re annoyed by your pal’s perpetual brokeness, they likely feel pressured to keep up with the group financially, too. That’s a tough spot to be in, and as a friend, you should find ways to spend quality time together that don’t force your buddy into yet another awkward situation.

Fortunately, another great thing about friends is that all you really need is each other’s company to have an awesome time.

Check your local weekly for low-cost and free events such as concerts, art exhibits, and movie screenings. Have a picnic at the beach. Go for a hike. Get dressed up, pretend you’re rich, and hop from one open house to the next while eating all their snacks along the way.

Consider it a gift.

That Annoying Broke Friend

When your friend does ask for money, and you feel comfortable parting with the cash, treat it as a gift. Loaning money turns a personal relationship into one of business, which opens the door for guilt and resentment on both sides, especially if the borrower isn’t able to pay up.

It’s your choice whether or not you want to support your friend financially — and it’s perfectly fine if you do. Keep in mind, however, that you can’t expect things to change if you continue to enable the situation.

Friendship is something that only becomes more precious as you grow older; it can be tempting to over-compromise in order to avoid conflict. But true friendship is also built on honesty and desire to make each other happy, so don’t be afraid to share your feelings in a caring but straightforward manner.

And if your own financial goals are jeopardized in order to keep the peace between you and a broke friend, that friendship probably isn’t worth it in the first place.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!