Lending money to friends or family: Good idea or asking for trouble?

by Nick on July 28, 2010

Earlier today I saw this article and it hit close to home.  A couple of years back I got a call from (let’s just say it was from a friend or family member and refer to the person as “Cal” – for caller) asking for money.  It was not someone with whom I speak regularly and I’m actually not quite sure how Cal got my number.

Anyhow, this is basically how the call went: 

Cal: I need money, but it’s just because I’m having a hard time lately and want to buy gifts for family members for the upcoming holiday (can you tell I’m trying to be as confidential about Cal as possible?).
Me: I can’t give you money.  I already have all money earmarked for other causes.  I have a lot of student loans and need to keep up with them.  And my building with my buddy is putting a big strain on me.  I’m sorry, but I wish you luck.
Cal: OK.  I understand.  I hear you’re doing well and feel terrible asking but I’m not sure who to ask for the money.
Me: I understand as well.  I wish I could give you money but it’s just not possible.
Cal: OK.  Thanks anyways.

Something to that effect.  Then the call ended.  I felt terrible.  I wanted to help, but did not for a number of reasons.  Here are my main reasons why I said no:

  1. I simply did not want to have that history between us (the loan or the repayment concern);
  2. I did not want to give a little and then get another call for a little more and a little more (I was still in my twenties at the time and did not want to have decades more (God willing) of these calls from Cal or anyone else);
  3. If a merchant or vendor fails to repay (or just pay), it’s easier for me emotionally to sue or engage in other collection activities than if it’s someone you love or even care about;
  4. I actually had other uses for the money requested if I were to give it away – family members who could use it to pay for necessities, not holiday gifts;
  5. As you may be able to tell, I spend a lot of time and effort thinking about money and caring for the money I work hard for, so I don’t like to just give it away.  I safeguard my money.  I give money away.  I donate to charity.  But this wasn’t charity; and
  6. Frankly, I did not agree with the use of the money.  This one is a little controversial I suspect.  Why is it my business (other than because it was still my money at that point…)?  Why does it matter?  Well, in this case it hit me close to the gut.  I simply don’t like the idea of spending a lot of money on gifts just because there is a holiday coming up.  Call it what you want (dumb? stubborn? whatever) but it is what it is.  This is probably a post in and of itself and says a lot about me (not sure whether it is positive or negative or neither…).

So that’s pretty much it.  Some of the reasons may overlap or just be the same thing written different ways.  In the end, lending money to a friend or family member is not something I enjoy.  If it’s a few bucks I generally make it clear that it is a one-time thing if they don’t pay it back, but that I won’t bring it up again.  And I don’t.  I’ve spent money on family members for emergencies (true emergencies).  I don’t bring it up.  I don’t think about it.  I don’t care.  It was something I wanted and needed to do.  I did not loan money.  I did not give money.  There were emergencies and I spent money to address them.  And it didn’t get awkward.

If it is a lot of money it’s probably just not going to happen unless it is a crazy emergency. 

What do you think of my take?  What do you think of “J. Money’s take“?  What about J. Money’s commenters?  Let me know in the comments.

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