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Reasons to Teach Your Children to Avoid Lending Money to Family & Friends

Lending Money to Family & Friends
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The most important skill you could teach your children is to manage money efficiently. Individuals who are not careful about spending, lending, or saving money would not be able to manage their finances properly and could find themselves struggling with overpowering debts. Teaching your child the value of money and the best way to manage money is one of the biggest responsibilities of parenthood. We are witnessing a fact that as kids are becoming adult individuals, many of them have no clue about money management. They are accumulating thousands of dollars in terms of credit card debt.

One major mistake people make is to lend money to friends and family. As a parent, you must be experienced enough to know that over 50 percent of people have witnessed a friendship end simply because of money matters. According to https://www.huffpost.com, as soon as, you take or give money to a close relative or friend, the relationship is going to be ruined sooner or later. You would no longer be confidants, BFFs and bosom pals. Once you lend money even to your best friend the friendship undergoes a transformation and it becomes a strictly business relationship such as the relationship between a borrower and a bank. We understand that there are very few exceptional cases that have a solid foundation to tackle such a stressful and dramatic shift.

It is quite natural for your young children to feel that it is a good thing to help a friend in financial distress, but you have to tell them about reality. Young adults with a good education are getting well-paid jobs and are often having surplus money that should go toward savings for the rainy day but they often make the mistake of keeping on helping friends and relatives in financial turmoil. As a parent, your heart may be filled with a feeling of pride to see the generosity of your child and you may even go to the extent of praising your parenting capability and how well you have raised your child. But practically speaking, you have to convince your child that it is a sure shot recipe for disaster and his friendship would be ruined in the long run. Here are some of the reasons to enlighten your kids about lending money to bosom friends and close relatives.

These Are Open-Ended Loans

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Loans to friends and family generally are open-ended. You do not discuss timelines for paying back or for that matter, you do not even ask for any interest on your loan. Lenders have no idea when their money would be repaid and even the borrowers have no clue when they could be in a position to return the money. This sort of an informal arrangement could be very stressful as the lender would constantly worry about his money and the borrower would be stressed because he would assume that the lender is expecting repayment.

A Parent’s Tip to His Kid: If you have to lend some money urgently to a friend or relative, you must necessarily provide them strict schedule and timeline for paying back the loan. Set a deadline for repaying the entire amount and the schedule for providing the lender with precise guidelines regarding monthly payments. When you are clear about these points, there would be no room for any miscommunication or misunderstanding.

These Loans Would Not Be a Priority

With this sort of an open-ended loan, often the borrower does not give top priority to paying back the money borrowed. Between friends or close relatives it is assumed that there should be no formality or any sense of urgency. The borrower is pretty confident that there would be no adverse repercussions for not returning the money on time. Frankly speaking, without any penalty threats, there is no motivation for the borrower to return the money to his friend or relative.

A Parent’s Tip to His Kid: Talk to your relative or close friend and tell him that it should his top priority to return the money to you. It is best to always set a deadline in such cases.

You Would Find It Tough to Tell that You Want the Money Back

You would be hesitating to ask your bosom friend or close relative to give back your money. It is quite possible for you to have strong feelings for your friend and would not want him to feel awkward or hurt. At the same time, you would continue to keep worrying about your money and why your friend is not giving back the borrowed amount to you. You would be overstressed mentally and want your money back desperately. However, you gradually stop communicating with your friend or relative to make sure that you do not end up talking about your money and embarrass them.

A Parent’s Tip to His Kid: If you are finding it difficult to ask for the money back, you must gradually talk to your friend and take enough time to effectively resolve the situation. You may use gentle reminders about the loan rather than asking directly. This would help in making the discussion far less threatening, and relatively less ugly or nasty.

It Could Be Pretty Odd to Be in a Get-Together

You would find it difficult to relax in a get-together of friends if you have given a loan to your best friend. Similarly, it would feel awkward to be in a family gathering if you have given some money to your cousin who is also, present there. Both the lender and the borrower would feel uncomfortable under the circumstances particularly when other friends or relatives are aware of the loan.

A Parent’s Tip to His Kid: There is no reason to feel uncomfortable. Instead, keep the atmosphere of the party light-hearted and stay away or discourage any discussion about money or loans. The idea is not to embarrass or hurt anyone.

The Borrower May Request Again & Again

Once you have loaned money to a family or friend, it may become a habit on the part of the borrower to ask for help again whenever he is in a financial mess. Moreover, this could encourage other friends or relatives to request you to help them with money.  How can you refuse them? Won’t they feel hurt? It is best not to start this vicious cycle.

A Parent’s Tip to His Kid: Do not assume the role of a go-to-lender among your friends and relatives. You simply cannot be in a position to go on lending.

You Are Not Helping Your Friend to Grow Up & Face the Challenge

By providing easy money to a friend in monetary distress, you are giving him a really easy way out of the problem. Everyone must learn to work successfully through their problems. For instance, your cousin has requested you for a loan for paying off his outstanding credit card bills. However, you could help him to learn how to chalk out an affordable budget. You must refuse the loan instead, offer assistance to him about creating the budget or even finding a part-time job in the evening for additional income to pay back the credit card company.

A Parent’s Tip to His Kid: Take proactive steps for improving the overall financial situation of your friend or relative. No need to indulge them. Teach them some guidelines for effective money management.


There are several other reasons to teach your children to avoid lending money to close friends or relatives. Your kid would lose the interest money by loaning an amount to friends and family. There is every chance that he would lose both the relationship and the money. It is best not to jeopardize his relationship by giving loans to close relatives and bosom friends. Only in very rare cases when he knows that he could talk openly about money, deadlines, monthly repayments, etc. he could consider lending money. Often frank discussions could prove to be fruitful. If he has the money and he is really very attached to the person, he could gift the money instead of lending them money. If his friend pays back the amount, it would be a great surprise to him. If his friend does not, he did not at all expect it anyways. Moreover, it is best to tell your son or daughter to recommend to his friend a reliable and reputed lending organization such as lending organization for seeking their assistance and advice.

Bio: Isabella Rossellini is a marketing and communication expert. She also serves as content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business and start-ups.