It is natural to turn to people close to you for help when you need it and to want to help others. However, sometimes unclear communication or misunderstandings can cause strain on your relationships and unnecessary financial hardship

Informal money arrangements among friends and family are very common.  Research has shown that as many as one in five U.S. adults receive financial support from friends or family, and up to one in three U.S. adults provides support to others. During times of crisis, these support networks can provide timely help.

Discussing financial arrangements among friends and family can help reduce strain. It may feel awkward to have a frank conversation, but remember the goal is to come up with an arrangement that works for everyone involved. This will help prevent more difficult conversations later. Below are a series of questions that can help you work together to solve problems and maintain strong relationships.

Asking someone if you can borrow or share their resources

Before you approach your friend or family member with your need or request, take a short time to think through all of the information you need to share and what the results could be of your request. You should be ready to provide clear answers about your situation. This can help you have a better conversation – and potentially a better outcome for your finances and your relationship. Ask yourself:

• What exactly am I asking for?
• Do I have other ways to meet those needs?
• How would my relationship to this person change if they agree – or if they turn me down?
• Do I have the ability to pay this person back?

Be realistic, and be honest with yourself, and the other person.

Has someone asked you for money or support?

Before you respond to a friend or relative who asks you to share or lend resources, pause to think it through first. Ask yourself the questions below, and then see if you need to clarify your understanding with the other person:

• Am I being asked to give a gift that will not be paid back, or provide a loan that will be paid back?
• How could this affect my own money situation, in the short and long term?
• How would my relationship to this person change if I agree – or if I turn them down?
• If it is a loan, what happens if they don’t pay it back?
• If it is a loan, do I need it to be paid back with money, or are there other ways to be repaid – for example, can I accept other services like childcare, transportation, or something else in exchange?

Again, be realistic, and honest with yourself and the other person.

 If you can, write out what everyone has agreed to and give everyone a copy to refer to later. Whether you write it down or not, your agreement should answer the following questions:

• Who is providing what (money, time, services, or something else) to whom?
• How much, how often, and for how long?
• Is this a one-time exchange, or happening on a regular basis?
• How and when will the lender be repaid?
• When will the arrangement be considered done?
• When or how often will you check in with each other?
• What happens if circumstances change?

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Teaching Suggestions:

• Under what circumstances should you borrow from family members or friends?
• Ask students if they have borrowed or have lent money to family members or friends.  If so, let them share their experiences.

Discussion Questions:

1. Do loans from family or friends complicate family relationships?  Explain.
2. Why should all loans to or from a family members be in writing and state the interest rate, if any, repayment schedule, and the final payment date.