SHOULD YOU LEND MONEY TO FAMILY?

What you should consider before handing over your hard-earned savings

You’re probably used to helping your family out with a little cash here and there, whether it’s pocket money for doing chores, money to pay phone bills, see a movie or buy clothes, for example.

But what happens when they put their hands out for help to buy the big-ticket items? They might want some money to buy a car, pay for a holiday or get a deposit together to buy their first home.

The question is, even if you can afford to help your family financially, should you? It could provide them with a helping hand but you must ensure you’re not leaving yourself short.

THINGS TO THINK ABOUT:

Discuss how the money is going to be used. Is it something they could save for or do they genuinely need your help?

Decide if you want the money back.

Even if you can afford it now, think about whether you might need the money for other expenses or commitments later.

Agree on the terms of when and how the money will be repaid.

If you decide on a loan, discuss how and when the loan could be repaid by, plus whether you will impose any sort of penalty (such as interest) if it’s not repaid on time.

Write it down.

This might sound overly formal but it sets the ground rules for making a true commitment to repay the loan.

Ask for advice.

If you’re lending a significant amount of money, you might want to check with your solicitor if there could be legal repercussions, including what happens to the loan if your child gets married or is in a de facto relationship.