One of my relatives asked me for money a few times in the past. The first time, he said he needed money for a security deposit on an apartment; the second time, he said the money was for groceries. Both times, he played up the situation to pull on my heart strings: he needed his own place so he could get custody of his daughter, or he was literally starving and had exhausted alternative resources.
I caved and wired him cash. If the cash helped him out, I wouldn't think much more of the situation. But the reality is that he's someone who consistently mismanages money, fails to keep jobs long-term, and makes poor life decisions. He lied about where the money was going and never did get that apartment. I also suspect he used the food money to purchase cigarettes and alcohol. By now, I fully realize that giving money to him is like throwing it into a black hole.
Situations like these make you think twice about giving money to friends and family. It's often a mental struggle because you want to help someone, yet you wonder how giving or not giving will affect the both of you, financially and relationally. Some people say the solution is to never give cash to relatives or friends, but I don't think it's always that black-and-white. It's a hard, and very personal, decision that will vary with each situation. These guidelines can help though.
Be Clear and Consistent With How You Handle Cash Gifts
My relative didn't lie the next time he asked for cash, as it was for a cell phone. I told him no and that I didn't consider it a need. He was angry with me for a while, yet he hasn't asked for money since. In this situation, it would have helped if I'd been more clear and consistent up-front with my yeses, noes, and reasons for them.
You may want to specify that you'll only help with certain types of expenses or say no across the board, regardless. The important part is to stick to the plan though. If others know your policy on cash gifts and the non-arbitrary, non-personal reasons behind it, there's less room for hurt feelings or manipulation.
Be Aware That Giving Money May Lead Others to View You as the Family Bank
In some families, when word gets around that you gave so-and-so cash, you'll have a line of others looking for the same. It's annoying when people assume you have limitless resources or play the equal treatment card, but it's important not to make anyone feel as if you don't care about their needs. If you suspect members of your family will react this way, it's a strong argument in favor of keeping a clear-cut "no cash" policy.
If Someone Can't Be Trusted With Cash, Pay for Things Directly or Offer Non-Monetary Help
Giving my relative cash will never help (unless he learns better financial management). But that doesn't mean I can't help in any way —even financially. If your relative is going through a true financial crisis, and you don't want to see them homeless or starving, one solution is to pay for their bills, rent, car repairs, deposits, or groceries directly. Offering non-monetary help (job-searching, taking them to work, driving them to an interview, etc.) is another good way to help people who haven't yet learned to handle cash responsibly.
Never Consider It a Loan. It's Always a Gift
A Lending Tree survey with 1,000 participants showed that only 51% of money lent to family member or close friends is ever paid back. Why allow relationships to become strained or even ruined by unspoken feelings of resentment? There are ways to lend money to relatives responsibly, but I think it's better to consider it a gift (even if they promise to pay you back). Make sure there are no unconscious strings attached: don't expect anything in return, whether monetary or otherwise. A simple "thanks" should do.
Make Sure You're Not Hurting Your Own Financial Goals
If you're generous by nature, it might be tempting to give until it hurts, but helping someone else should never compromise your own financial security, either now or in the future. Unfortunately, many older adults have neglected their retirement savings as they've gotten caught up in helping their adult children. Only when you've taken care of yourself are you in the position to continue to help those you love.
Learn From Your Mistakes
The experiences of giving money to my relative taught me to be less gullible, more clear and consistent with my giving policies, and be free from resentment regardless of how someone uses the cash I give them. If you've made mistakes when giving cash, do you best to assess what went wrong and be smarter about it the next time around.
Written by Jessica Sommerfield for MoneyNing and legally licensed through the Matcha publisher network. Please direct all licensing questions to firstname.lastname@example.org.