There is a wonderful kind of privilege that comes with working hard for the last three or four decades… Savings are finally growing, the debt and/or mortgage is being paid down, and finally it feels like we can breathe just a little and enjoy life!
And sometimes this means we are fortunate enough to be in a position to help our families. This generosity can be a beautiful expression of our love and support.
But it’s important to approach the decision to give or lend money thoughtfully, considering both your own financial security and the potential impact on your family relationships.
Let’s talk about five reasons to NOT give or lend money to family (and what I encourage doing instead, as a holistic financial coach).
I’m a parent myself, and I clearly remember denying my child a toy in the grocery store because our finances were right on a razor’s edge. That was 20 years ago, and I still recall it. I have the image of that little heart-broken face burned in my mind.
Guilt motivates us in unexpected and far-reaching ways. And, frequently, choices made from a place of guilt do not serve us long-term. It’s very rare that we consciously follow the cause and effect of “I had to say no to you when you were a child, and it broke my heart… the least I can do is make it up to you now.”
What you might consider if you’re giving or lending from a place of guilt:
First, be gentle with yourself!
Then examine the purpose of giving or lending money to your family member.
I’m not saying anyone should or should not lend or give their loved ones money, but it’s important to slow down the decision making process and understand the purpose of this money.
What is the purpose of giving/lending this money FOR YOU? What will this act provide to you? Peace of mind? Assuaging some long-held guilt? Ending an argument? Something else?
What is the purpose of giving/lending this money FOR THEM?
I get pushback on this because isn’t that OUR JOB as parents?
Of all of the lies we’ve been told about our responsibilities as parents, this is probably the one that undermines our wellbeing the most. Specifically because how most of us heard that expectation is that our family should have nicer things, a better education, eat better, and have more opportunities than we did. But how do we actually define “better”?
Of course, I’m not saying we shouldn’t want our children and family to be happy, but it’s too easy for us to see our family’s lives (belongings, lifestyles) as a commentary on us as parents. And it’s difficult to know when we’re no longer on the hook for that.
How much of your family member’s life and lifestyle do you hold yourself responsible for?
What you might consider if you’re giving or lending from a place of expectation and responsibility:
Filial piety isn’t a phrase we throw around too much, but this expectation lingers throughout our culture.
The expectation is that at some point, our family will financially support us as we age. Maybe you did that for your parents, and they did the same for their parents. It’s a subtle expectation that has an outsized impact. How often have you heard that assumption spoken? How often have you thought about it?
If you had to guess, how would you think that expectation feels to your child(ren)?
No one wants to think of their relationship with the people they love as transactional, but now might be a good time to explore this expectation.
Another element to filial piety is its inherent codependency. If you’ve at least at some level built your financial life with the implied expectation that your children will care for you later and then they are unwilling or unable to do that, you’ve exposed yourself to a huge amount of risk.
By supporting your family now, are you expecting them to repay that later?
What you might consider if you’re giving or lending from an expectation your children to care for you in the future:
Any time you feel like you don’t have a choice, whether you are making yourself feel like you are out of options or someone else is encouraging that feeling, it’s time to take a pause.
Our brains don’t make good choices when we feel cornered, and often these quick, reactive, emotional decisions end up being something we regret later.
How much of the motivation for giving or loaning this money is accompanied by thoughts like “I don’t see any other way”?
What you might consider if you’re giving or lending from a place of feeling like you don’t have any other choice:
We might be loath to admit it, but our family is a reflection of us.
Sure, we’d all like to say it doesn’t matter to us what our larger communities think of us, but in reality, we humans are a social bunch. Being seen as part of a community means safety.
How much of your motivation to give or loan this money is tied up in the potential that others will see you a certain way?
What you might consider if you’re giving or lending because you’re concerned about appearances:
First, be gentle with yourself! (Seriously!)
One last element to consider:
As humans, we use emotion in our decision making.
We should NOT be working to actively remove emotions from decision making, but we should be thoughtful about HOW we use emotions.
Emotions are tools, but sometimes our emotional brains can get caught up and make decisions from a place of emotion, not just using them as tools.
Emotional decision making is typically fast. It’s a flood of emotion and activity, and in some cases can be kind of satisfying. Decision making from a place of emotion also solves for just one thing.
By including emotion in decision making, understanding why it’s there and slowing down the decision making process, we are more likely to make a good long-term decision.
Including competing emotion into decision making slows down the decision making process. That’s good! That complexity is there to help.
Now instead of solving for just one thing, we’re solving for two or maybe three things.
Slowing down decision making means we can look for and take advantage of other possible options.
Emotional decision making is lightning fast, reactive, and simplistic (solving for just one thing).
In short, none of us wants our family relationships to be transactional. Many families can manage gifts and loans beautifully, others end up in resentment, pain, and strained relationships. The biggest thing you can do here is to deeply understand your own motivations and slow down your decision making.
Making this decision less about the money and more about the act of giving or lending.
Every decision we make has echoing impacts in our lives, and while we can’t be aware of every eventuality, slowing down helps us make better informed decisions while prioritizing genuine connection with those we love the most.
Making informed and thoughtful decisions about your finances is a gift you give to yourself and your loved ones. By prioritizing your well-being and fostering open communication, you can create a foundation for a stronger and more fulfilling family life.
Ready to explore a bit more? Download the companion worksheet to this article here, exclusively for Sixty and Me readers!
Do you often give or lend money to family? What are your reasons to do so? Do you have any return expectations?