Lending money to family member can be a generous gesture, but it’s important to do so with care to preserve relationships and financial health. Have you ever lent a family member money? Tell us what happened! Cindy Scott, CFP®, CRPC®, ChFC®
Gifting a family member money, if you can, is different than lending a family member funds. No strings attached allows both parties to benefit, without feeling obligations to perform. The goal is to use the "gift" to improve a life, not burden it.
I never lend money. If someone doesn't qualify for a loan with a bank or credit union, the chances of you getting repaid is slim to none. I lost a friendship with a former manager who I lent $300 to and of course I was never paid back. If you lend money to anyone, do it with the intention as a gift.
I like the blog post. Lots of points to consider. The biggest one for me is, how comfortable are you with lending money? I find that I am not a good bank, nor do I have the desire to chase people down if they miss a payment. If I have it, I would rather just give it if someone needs it.
A bank is not an unbiased source for this kind of information. Of course the bank would prefer you give your money to them. They would also prefer to pad corporate profits by forcing your relatives to take underpaying jobs.
Although according to the Chinese Census of China between 20 to 25% of all Chinese are related to me via family bloodlines and I do literally have 1000s of cousins in America, I do agree with Cindy Scott. I have also been an estate planner for the Highly Compensated as well as a political executive and find her suggestions to be sound.
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2moIf I lend someone money, I usually do it with the understanding that it's a gift. That way, I'm not hurt when it's not paid back and I'm pleasantly surprised when it is paid back. Either way, you have to ask yourself if it's worth losing a friend over money. I've seen a lot of friendships dissolve and families fight over money. Most of the time, it isn't worth it. I take a lot of time thinking about the possibilities before lending anything.