Whether it’s writing a cheque to a family member who’s way behind on rent, or spotting a friend a big chunk of change, lending money to loved ones is something most of us have done – even though it can be painfully uncomfortable.
That’s especially the case if that same person has been mooching off you to pay their landlord for months on end, or never seems interested in paying you back after you helped them out of a pickle.
Yet many people hit up friends and family for extra cash, especially when times are tough. A 2019 survey from the US Federal Reserve showed that when faced with a hypothetical expense of $400 that they couldn’t cover right away, the second most common approach was to borrow from a friend or family member (putting the charge on a credit card was the top option). And during the pandemic, people may be especially likely to turn to trusted confidantes for a helping hand.
Still, there’s no doubt introducing money into a relationship can make things weird. We’re generally close to the people to whom we lend money. But experts say that lending money conflicts with societal taboos about discussing money and introduces a power imbalance into a close, trusting relationship. This can potentially leave both parties feeling complex emotions like shame, embarrassment, and anger.
Navigating this kind of situation can be hard, but with clear communication and expectation-setting, you can avoid a lot of the discomfort that comes with helping a friend out.
A taboo that changes relationships
“I think money is still a very intimate subject for a lot of people to talk about authentically,” says Maggie Baker, psychologist and financial therapist based in Pennsylvania, US. People may talk about money a lot, but we don’t ask each other about our specific financial situations, she says. “There’s this shroud over this whole topic of money, and how much you have, and how much you don’t have.”
J Michael Collins, professor, and director of the Center for Financial Security at the University of Wisconsin, US, says that money is already a taboo topic of conversation. That taboo makes relationships complicated and murky.
“If I go to a bank and take out a loan, they’re going figure out if I can repay it or not. Then I sign a contract, and that contract says if I fail to pay, then something will happen: they’ll garnish my wages, or take my car back. We get none of that when we loan money to a relative” or friend, says Collins. It’s the “loose nature” of the agreement, as well as the “lack of follow-up ability or accountability that makes people really nervous”.
If you loan somebody money, they’re indebted to you whether they recognize it or not – and then all of a sudden, you’ve got the power – Maggie Baker