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Are you two fighting over whether or not to lend money to family? Learn how you can help your loved ones out without messing up your money and marriage! 

The Stress of Lending Money to Family

Should you loan money to your family whether it's yours or your in-laws? It can be a very tricky subject within a marriage.

Nothing can tear apart a marriage like family. And when you throw money into the mix it gets very stressful.

We've had to deal with this as a couple in our own marriage.

Most of the time, it hasn't been a problem, but we have had some hard discussion between ourselves family. And it looks like you're also dealing with this.

One of my most popular episodes on the podcast, even years later is How to Lend Money to Family without Being a Chump.

So I want to share some tips on how to decide if you should help family and how you can assist without loaning them money.

Should We Loan Money to Family?

I've noticed that there are two main reasons why couples fight and there's a lot of tension.

The first is you guys right now aren't in a position to financially help out.

I understand that you have this instinct to help out when you can, but there are some instances (especially when you guys are deep in debt) where you just don't have the circumstances and it's best for you to be upfront with your family on that.

Don't worry there will come a time when you'll have that ability to help out. But sometimes that is the best answer you can give them that way.

If they have another solution or someone else that they can ask they can do it sooner rather than later.

The second (and to be honest the most common) reason why couples fight over helping out your family are not with money is that there is a question in one of your minds if it's really helping or if you're enabling.

We've all had family that had emergencies. There is unexpected job loss, a child got sick and they had some savings but not enough to cover.

In those cases, most of us will give what we can to help the family out in a tight spot. But sometimes you might have a relative who constantly seems to have one emergency after another.

So how can you tell if this is a case of helping them or enabling them?

I have three questions you can discuss together to make things a bit more clear and less stressful.

  • Is this the first time they've asked you for help?  Sometimes when you're in the thick of it when it's your family or when your spouse is dealing with their family it's hard to have a clear head. It feels like an emergency comes up and immediately they need help now. If this has happened before, it could be a case of bad money management.
  • What exactly is the emergency? We all have our own definitions of what an emergency is, but the general rule of thumb is this is sudden something unexpected. Is this a situation where they didn't plan out their budget or a true emergency?
  • What's their back-up plan? You might find that they actually don't have a plan. It was all about relying on you as their safety net. Or it could be that they do have other people in their support network that they can ask.

So hopefully those three questions will give you a better idea if you're really helping them or enabling them.

Ideas to Help Family and Friends Instead of Lending Money

Maybe you guys decide that you want to help them out by lending money still isn't something you would rather do.

  • Give a gift. Don't loan, just give a little something. We've given amounts that haven't damaged our budget with no expectation of getting it back. It's a free and clear gift.
  • Offer to help them with budgeting. You don't have to look at their numbers, perhaps you can share your budget spreadsheet.
  • Point them to different resources that they can use. Of course, if they're married you can point them out to this site but there are organizations out there like Single Stop that can help them get back on their feet.

Your Thoughts on Lending to Family and Friends

So there you guys have it. I know it's hard dealing with family. I'd love to get your take on this delicate situation. Have you ever lent money to loved ones?

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

12 comments add your comment

  1. My wife and I simply don’t loan money to friends and family. The biggest risk, as we see it, is that the relationship will be strained or broken. Why? Because in reality the money will probably not be paid back. Going through life with a friend or relative who owes you money is just plain awkward.

    This being said, if we have the money and we think the person is making a 100% effort to dig out of the hole they are in, we will give them the money. We think this is better than lending. Some times we can give anonymously if we think there may be some embarrassment involved in receiving a gift.

  2. Hey Elle – great post, a conversation that must be addressed for sure.

    I’ve seen people get burned time and time again with lending money to friends and relatives. I’ve even helped some folks who’ve given so much (because they became the go-to person for financial help in their family) that they are now struggling themselves. I’m with Joe – if I have some money and I know they are earnestly trying to improve their situation, I’ll GIVE it to them.

    Proverbs 22:7 says borrowers are slaves to lenders. We feel that way when we owe Chase and Sallie Mae, why wouldn’t we feel that way when we owe Uncle Charlie? On the flip side, why wouldn’t Uncle Charlie feel that way about us if he owes us money?

    I’m not going to jeopardize my relationships with the burden of a financial ball and chain. I’m not interested in being anyone’s master.

  3. I have a family member who loaned a close relative over $17,000 to buy a car and guess what? Ten years later that loan has never been paid back – and it never will be.

    Meanwhile, the person that took the loan has remodeled his kitchen and spent lots of other money on other things. Deplorable – not to mention completely disrespectful.

    Some people just have no conscience.

    I don’t loan any money to friends or family unless I can afford it AND I am willing to accept that I won’t get it back anyway.


    Len Penzo dot Com

  4. The previous comments are right on. Just make it a gift if you want to help out. You don’t want your family / friend get togethers to become a source of stress if a loan doesn’t work out.

    However, if you do take the route of lending money, then the post’s tips are correct. Have it in writing and have some knowledge of spending habits. If someone is insulted that you won’t loan without this information, they probably had no intention of paying it back.

  5. I agree with all of the above comments. I also think that we sometimes worsen the situation by giving because we allow their misbehavior (poor financial management) to continue. We have to be careful what we call help.

  6. Thanks for sharing your thoughts everyone. I’ve been burned by lending money to family. Part of my frustration was that I’ve had a habit of ‘loaning’ without really looking into why they need it or even coming up with a repayment plan. I know that’s my fault for not checking and I’ve learned from it. I’m more inclined now to say no.

  7. I lent a large amount of cash to two close family members (withing 6months or each other) through a personal loan and off my credit cards as they were in desperate situations. I was always ok with my cash but was young and did not have the money to lend from savings.

    Anyway all was well for a few months after with the repayments and then it went to hell and 7 years later I found myself with $40k of debt that I could no longer handle.

    They are both in dire straits and I really think their mentalities will mean they always will be. I also don’t think they appreciate what situation they put me in, I was dragged into their world for being too kind and not saying NO.

    As of January this year I have the debt in a debt management plan and pay roughly $200 a month for the next 18 years (equiv of a mortgage in some places!)…. I’m slowly recovering myself and am determined to build up savings and get myself far far away from those debt ridden days.

    NEVER lend to family and friends unless you can honestly afford to lose the cash 🙂

  8. Sorry to hear about the debt; I worry that my relative will have a similar outcome. I really appreciate you taking the time to share your story.

  9. I’m not a big fan of lending money to friends or family. Like Tim, I prefer to give the money, rather than to have to ask for it back. But, I wanted to share a more positive story, to balance against some of the nightmare stories shared by others.

    My Mom is a smart and thoughtful person. She has a business degree, worked in a bank and then owned a bookkeeping business. When it comes to money, she is one of the wisest people I know. She isn’t interested in being anyone’s emergency fund, but she has helped us kids at critical times in our lives.

    When we bought our house, I had saved up a sizable downpayment. But, I had $4K on a credit card that was killing our rations. So, even though it hurt my pride, I went to Bank of Mom. She scratched out a check, made me sign a promissary note and gave me a payment schedule, all in one shot. When I made the last payment (on time and to the penny), Mom gave me a Congratulations card and a bottle of champagne.

    Thanks Mom. That’s how I learned to operate the Bank of Dad for my kids.

  10. I totally agree and a well written article. Lending to friends and family is difficult as you don’t want to keep asking them when they will pay back the money. I’ve lost out over £200 in the past from lending to a brother in law. The same thing applies to doing favors, try and keep friends and family as just that and business and money separately. I’ve learn’t my lesson

  11. I have worked as a caregiver for 9 years…one lady I helped signed a note for her (worthless–my opinion) grandson to buy a pickup..(co-signed, I believe)….she told me that he did NOT make one payment…it did not end well for her. However, she continued to give him $ every time he asked…he had a good deal going with her!! The family knew, but seems as though no one took charge or stopped the continued borrowing.

    • Oh no; how sad! 🙁 I wish someone from the family stood up for her.

      Years ago, my mom co-signed a loan for my car. Even though the car got paid off early, I know now what a big mistake that was and how it put her finances at risk.