Accepting Money from Family Members

Whether you borrow money or receive it as a gift, there can be major drawbacks to accepting money from family members. Kathleen Gurney, chief executive of Financial Psychology Corp., advises people to exhaust every possibility before asking family members for money. Family members may never tell you their true feelings, and those hidden feelings can become barriers to resuming your pre-loan relationship. If borrowing from a family member is unavoidable, make sure you follow these tips:

• Set out clear expectations from both parties upfront.
• Don’t continually ask for money. People get tired after a while if you’re always asking to borrow for something.
• Don’t ask for money to pay for things that aren’t necessities. Family members will view you as a child if you ask to borrow money to pay for a cruise.
• After borrowing money, be careful what you spend your money on. Lenders begin to watch your spending closely, criticizing purchases they think are inappropriate.

“Ultimately, money is transitory, and things you buy are transitory, but relationships last a lifetime.”

Ruth Mantell, How to Accept Money from Your Relatives, W.S.J., Oct. 20, 2010 (quoting financial educator Jason Alderman).

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.