If you were going through tough financial times would you ask your parents for money? Now what if your parents were struggling financially, would you lend them money? Over the years money has exchanged hands between myself and my immediate family (Mom, Dad and younger sister) without any trouble. However I haven’t had the best experience with my extended family members; as this has been more recent it changed my mentality between family and money.
You don’t want to see your parents suffer
One of the best arguments for lending money to your parents is that you don’t want to see them suffer. If they need it and you have it then give it to them. That would be my first instinct if my parents asked for money.
Now keep in mind that my parents got divorced over 15 years ago so if they asked for money it would be separately and it would cost me double. However the odds of them both needing financial help at the same time are slim to none.
You may not have the means to lend money
Even though you may want to help your parents, if you don’t have the financial means to lend money then you shouldn’t do so. I don’t think that I would get into debt to lend someone else money. In a perfect world you would be paid back on time with minimal impact to your credit score and financial life. But what if that doesn’t happen?
In a less than perfect scenario your parents can’t afford to pay you back and now you’re stuck paying off debt that you never wanted to have. That’s not a great situation to be in because it leads to high interest payments, animosity in the family and possible ruined credit.
Talk to your spouse
If I needed to lend money to anyone I would talk about it with BF first because even though it’s a family matter and it’s my personal savings, lending out big amounts of money affects the relationship. Being owed money can be stressful and you both have to be ready for that to crossover from family ties into your relationship.
If you are leaning towards one side of the transaction and your spouse is on the other side maybe you can talk it out to find the best case scenario. That’s the great thing about being in a relationship, you can get advice and maybe see the flip side of a situation which could end up being more beneficial than the original choice.
If you do lend money to family always remember…
This is business, it’s not personal. Get everything in writing including how much you lend and on what date as well as the repayment plan and final day when the loan should be paid in full. Money, family and business don’t always mix and that’s why it’s always better to get everything in black and white.
In case something should go wrong it may ruin your family, but at least you’ll get your money back.