Helping Family With Bills? Set Boundaries Before It Costs You

When family asks for money help, your decision can be muddied by guilt, obligation, cultural expectations and a desire to make sure loved ones are taken care of. But how do you handle financial requests if your own budget is stretched thin?

New research from the Federal Reserve Bank of Richmond finds that there are real imbalances in family financial support. About twice as many people give money to relatives as receive it (42% vs. 21%). And among lower-income givers — those with household income of less than $30,000 — the median amount transferred was $800, or about a third of gross monthly income for a $30,000 earner. The average was much higher, an eye-watering $75,300, likely skewed by a few large transfers.

Unusually large transfers aside, the median gift of $800 is a meaningful ask, particularly for this income range. And since only 42% of Americans with a household income under $50,000 say they could cover a surprise $1,000 expense this month, according to NerdWallet’s July Financial Resilience Index, many of the people giving that $800 may not be able to spare it.

While many people would want to help their loved ones out of a tight spot, creating financial boundaries is important. This doesn’t necessarily mean saying no to family members, but setting guardrails to not jeopardize your own financial security.

1. Secure your emergency fund first

If money is tight across your family, it may feel uncomfortable to focus on getting your own money in order first, but it’s important to do. When you’re financially secure, you’ll be in a better position to help your loved ones going forward.

If you don’t have an emergency fund, start with a goal of $1,000. This may seem insurmountable, and it could take months to build up. But chip away at this initial rainy day fund a little at a time — $10 here, or $40 there. Ultimately, the goal is to save up three to six months of expenses, which can take years. That’s OK; just start small: $1,000 is a major step in the right direction of securing your financial future.

2. Decide whether the money is a gift or a loan

Determining the terms of a money transfer (Is this a gift or does it need to be paid back?) seems straightforward, but may not be. While giving a loan to a family member could help a loved one out in an emergency, not everyone feels the same urgency around paying back a financial obligation. In fact, some recommend never lending to family or friends and seeing any money you give to loved ones as a gift.

For family members with a history of borrowing money and paying it back promptly, you may feel comfortable lending to them again. But if you’re still waiting for funds lent six months ago, it’s probably safe to say that the borrower isn’t someone who can be counted on for repayment. In this case, only give them what you can afford not to get back.

3. Create rules before the next ask

It’s not an easy task, but setting boundaries around giving, particularly to repeat borrowers, is important for financial well-being and healthy relationships. This might mean several things, including:

Requiring repayment of a loan in full before giving another one.

Evaluating what they plan to use the money for and determining whether it’s a need or a want.

Limiting the amount of money given, even if it’s “not enough”.

Be upfront about your boundaries with loved ones. Money and family can be messy, with hurt feelings and awkward conversations. But you can create rules to keep financial gifts or loans from becoming a personal burden.

4. Help out in non-monetary ways

If you haven’t yet established that $1,000 cushion and can’t afford to give money, there may be other ways to help, like:

Researching relevant assistance or social programs.

Providing a free meal or childcare.

Assisting loved ones with creating a budget or savings plan.

Supporting family members doesn’t have to mean parting with cash. Sharing non-monetary resources can be impactful, while also not threatening your own stability.

About the author

Erin El Issa writes data-driven studies across personal finance topics. She loves numbers and aims to demystify data sets to help consumers improve their financial lives. Before becoming a Nerd in 2014, she worked as a tax accountant and freelance personal finance writer. Erin’s work has been cited by The New York Times, CNBC, The Guardian, the “Today” show, Forbes and elsewhere. In her spare time, Erin reads and crochets voraciously and tries in vain to keep up with her two kids. She is based in Ann Arbor, Michigan.

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