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Family, Money, Relatives
While most relatives would think a hundred times before asking you for money, a few may approach you under the slightest pretext.
Living in the UAE could also give your relatives an opinion that you are loaded with cash, and they could approach you for help when in need.
There is nothing wrong with helping your relatives in emergencies or for building a future. But then, you don't want to become a Human ATM, do you?
Here are a few things you can do when your relatives ask for money;
1. Understand why they are asking for money.
We live in testing times when even people with good financial habits are struggling due to a job loss or downfall in their business.
If the request is for a medical emergency, groceries, children's school fees, utility bills, or rent/mortgage, you could help them if your budget allows.
Not helping your relatives in an emergency could adversely impact your relationship while making you feel guilty. It would also be awkward dealing with them and almost impossible to approach them for any help in the future.
If it is for other reasons, you could entertain or politely decline, depending on the strength of your relationship and their need to borrow.
Also, if this is the first time they are approaching you, you could consider giving them. If the requests are recurrent and habitual, it would be better to discourage them politely.
2. Don't rush to say yes or no
Weigh their needs, your options, and the consequences of lending or not before committing or declining the request.
Also, if necessary and if the amount is significant, discuss it with your spouse before saying yes or no. Particularly if you both have agreed to make joint money decisions or if you are paying from the joint account.
Remember that hiding critical financial decisions from your spouse can harm your marriage.
After due consideration, revert your decision to your relative at the earliest. Making them follow up several times will sour the relationship even if you give the money for good.
The worst thing you can do is say yes and then go back on your word later. So do not promise until you are sure to be able to give the money in full and on time.
If you can only give a part of the money requested, make that clear at the outset. Informing them at the last minute could render the whole exercise useless.
3. Say No Politely
If your budget doesn't allow it or if you have money for just your needs, politely decline the request.
Do not borrow, dip into your emergency savings or use the funds set aside for future expenses like rent or school fees to lend to your relatives.
Unlike banks and other lending institutions, you cannot enforce strict repayment terms with them. It would be challenging to plan your future cash flow based on the repayment commitment from your relatives. Not receiving money as anticipated could mess up your cash flow, putting you behind commitments.
If you feel that you cannot or don't want to help the relative, say no politely without delay. While it is not mandatory, explain to them courteously why you are unable to lend at the moment.
If you still want to help, find out if there are other ways.
If possible, direct them to other potential sources, but never guarantee the repayment on their behalf.
4. Don't expect the money back.
If and when you lend small amounts of money to your relatives, don't expect the money back.
Consider it a gift while giving, and do not stress about the repayment. If possible, forget that you have given the money. Also, please do not build a position of financial/moral superiority or use this opportunity to judge or educate them.
This will help you maintain your relationship with them.
If and when they return the money, accept it gracefully. Do not remind your relatives to return your money frequently if they don't.
5. Make the Repayment Terms Clear
When you lend money to a relative and expect it to be repaid, make sure you communicate it clearly.
Verbal financial agreements are one of the prime causes of misunderstanding and disagreement between family and relatives.
Please make the repayment terms very clear and in writing if you are lending substantial money. It will help you firm up their commitment to repay and avoid future conflicts around terms. Many templates are available on the internet. You can use one to draft a written agreement between you and your relative.
If you feel that it is essential to lend and the cause is worthy, consider not charging interest. It dilutes your gesture and makes it look like a commercial transaction.
On the other hand, if you are lending for or investing in your relative's business/startup, consider the opportunity cost, risk, and viability, as you would for an outsider. Also, make sure that you receive adequate compensation in the form of interest or share in profits.
Insist on a written agreement between you on the lending, repayment, and compensation terms.
Summary
While there is no simple solution to this sensitive topic, the following steps can help you decide what to do.
- Understand why they are asking for money.
- Don't rush to say yes or no.
- Say No Politely without delay
- Don't expect the money back.
- Make the Repayment Terms Clear.
Feel free to contact me for an unbiased and expert opinion on how to win with money.
