What to Say When Your Friends, Family Ask For Money

It is commonly said that friendships and money don’t mix, and in most cases that is correct. The simple fact is that money can easily strain any relationship.

Many of us at some point have been there — our kids, our friends, our family — they want to borrow money, making us feel like a human ATM. It’s a tough dilemma, as saying yes OR no can both make you feel awful.

What should you do about this? First and foremost, don’t wait to decide how to handle these situations. Come up with a personal lending policy in advance and then stick to it when situations arise.

Evaluate your own lending power, how much you could realistically afford to lend, and perhaps more importantly, if you would be able to absorb a loss if the money can’t be repaid.

Don’t make exceptions, either. If you decide that you won’t, as a rule, lend to friends, then don’t make exceptions, even once. When someone approaches you for money, be clear, be firm, and give them an immediate response. This may not be the response they were looking for, but it will likely keep your relationship from taking on unnecessary added baggage.

Consider other ways you can help the friend or family member in need as well. Can you help them sell something, make a budget, secure other forms of lending? Giving money isn’t the only way we can support those we know and love financially.

Finally, if you do decide to offer a loan to a friend or family member, get everything in writing, especially if the money is a large amount. Sure, your relationship may be informal, but clearly defining the terms of a loan will prevent any miscommunication should an issue arise.

It’s great to be able to help those we love, but it’s never good to be taken advantage of. So create a clear personal lending policy, keep open lines of communication, clearly define the terms of the loan, and always put the relationship ahead of the money.

About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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