Avoid the Pitfalls of Being the Family Bank

Never jeopardize your financial stability or goals to help others. Reflect on how best to give financially.

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Q: I’m in my forties, I enjoy my career and have chosen satisfying work over a relationship and kids. It has paid off for me and I live a comfortable lifestyle, being able to travel and buy things I wouldn’t be able to afford if I had a family. However, whenever I get together with my siblings who all have busy families and related commitments, the comments about my financial situation, how I should help them more, how I should pay for family gatherings or buy my nieces and nephews bigger gifts never stops. It’s got to the point where I don’t even want to get together with them. I’ve helped out each of my siblings in the past, and every month help our parents pay for their private nursing home so that they can live together, rather than separately in a public home. I will always keep helping my parents, that doesn’t bother me. But how do I deal with the expectations from siblings that I’m their personal bank? ~Dale

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A: Many people feel a sense of obligation or generosity toward their family members, especially when it comes to money. They may want to help their relatives who are struggling financially, or they may feel pressured to share their resources. Relatives who expect to share financially in a loved one’s success only intensify the pressure to be generous.

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However, being the family bank can have serious consequences for both the lender and the borrower. It can create resentment, dependency, conflict, and stress within the family, and it can also jeopardize the lender’s own financial security and goals. When you are a single person, you must ensure your own future financial stability because there’s no one else’s income or financial support to fall back on if you run into difficult times or when you’re approaching the end of your working life.

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With that in mind, here are tips to help you deal with your family’s expectations for your generosity.

Evaluate your own financial situation

It’s important to ensure that you are financially secure before you lend or give money to anyone. While this may sound like a selfish place to start, think about the emergency instructions we receive from a flight crew as our airplane prepares for departure; we are told to put our own oxygen mask on before we help someone else. The idea behind this instruction is that you can’t help the person beside you if you aren’t in good condition yourself. The same applies to our finances.

Review where you stand financially: pay off your debts, save enough for emergencies, invest in your goals, and make sure your budget is balanced and aligned with your desired lifestyle. By prioritizing your own self-care and protecting your finances, you can be more effective and supportive to the people around you.

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How to Back Out of a Financial Commitment with Family Gracefully

Consider your family’s dynamics

Money is often called the root of all evil, and when it comes to family dynamics, there’s good reason for that. Disagreements about money between spouses often leads to the dissolution of a relationship, between siblings or with parents it can lead to a breakdown in communication, and with extended family or friends it can lead to decades of resentment. The way to avoid inadvertently causing a rift in your family and to protect yourself from feelings of bitterness or anger is to set clear boundaries and expectations or avoid any generosity altogether.

If you are still willing to share your financial success, help your family understand how hard you work and what that means in your day-to-day life. Your sacrifices are likely lost on them when they see your Instagram reel from a vacation they can only afford in their dreams. Remind them — and yourself — that you have the right to decline any request for money that makes you uncomfortable or jeopardizes your financial goals.

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3 Ways to Help Family or Friends Save Money (Without Giving Them Any)

Saying no can be hard, so remember that “no” is a complete answer; you are not required to justify your reasoning. However, an easier way to go might be to set limits for how much, how often, or under what circumstances you are willing to lend or give money to your family.

How to Help Family or Friends in Financial Trouble

For example, you can state that you will only lend money for emergencies, not for discretionary spending, and that you expect to be paid back within a certain time frame. You can also ask for a written agreement that outlines the terms of the loan. Be firm and consistent with your boundaries and don’t let your loved ones guilt-trip you into changing them.

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Giving or gifting for kids and teens?

When it comes to younger extended family members or the children of friends, it can help to keep a log of how much you gift or give and to whom. Treating everyone fairly and consistently will go a long way toward managing expectations. When gifting monetary amounts, you may want to consider giving alternative gifts with a token item to unwrap. For example, depending on the age and goals of the kids and young adults in your family, a contribution to an RESP, TFSA, or the new First Home Savings Account (FHSA) might be very appreciated. Subscriptions, family passes to local attractions, enrolment fees for a special activity, or memberships also make great gifts that can align with your values to support your loved ones, but that don’t scream handout.

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The bottom line on financial generosity with family and friends

When financial generosity becomes an expectation, that’s often a clear signal that your assistance has changed from help to handout. Setting boundaries and sticking to them is called tough love because it is tough. There are many ways to help loved ones who are stressed about their finances, even if they aren’t in serious trouble. If you decide to lend or give money to your family, treat it as an expense that you can afford to lose, not as an investment that you expect to get back. Don’t lend or give more than you can comfortably spare and don’t sacrifice your own needs or wants for theirs.

Related reading:

When Is “Joint Debt” Not Really Joint?

8 Money Mistakes That Keep You Broke

Give Yourself a Financial Reset in 5 Steps

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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