Helping Loved Ones Financially Without Undermining the Relationship
How to respect their dignity and your own solvency
As the pandemic rolled out of its tenth month, I logged into PayPal, clicked an amount of $2,200, and hit send—to a friend. The unlucky recipient was my out-of-work hairdresser, also enduring a hellish case of long-haul COVID (dizziness, brain fog, strange edemas, stomach distress). I am by any measure in a profoundly better situation than her: employed, able to log extra hours, and capable of walking from my bedroom to the kitchen without a physiological event.
Suggesting and providing this aid was a psychological tightrope. “The recipient can end up feeling indebted, as well as ineffectual and kind of incompetent, or believe that you feel pity for them,” says Grant Donnelly, an assistant professor at Ohio State University, who has studied how people react best to gifts.
Here’s expert advice on how to do it right.
Acknowledge the request. If a friend seeks financial help, no matter your eventual decision, first “acknowledge that the request demonstrates their vulnerability and trust in you,” says Perry Wright, senior behavioral research at Duke University’s Common Cents Lab. Our culture stigmatizes financial struggles, so let your friend know you care and understand that sharing is a big deal.
Chalk up their struggles to the pandemic. “A really successful strategy is to address the uncontrollable randomness of COVID. Refer to it as something that is clearly out of the person’s control,” says Donnelly, whose research has found that recipients feel well-cared for and happier when the gift is not being given because of personal failings. Example: “Who could have predicted that you’d be out of work for a year? I just wanted to offer this gift to you.”
Consider your own finances. Jot down your fixed expenses, discretionary expenses and access to liquid savings. “Don’t dig yourself into a hole trying to get your friend out of a hole,” Wright says. If you’re not exactly bringing home the bacon this year, think about a reasonable sacrifice on your end: Could you downgrade an upcoming vacation from hotel to camping? Not eat out for a month, or buy anything new for six weeks? The amount you’d save is a reasonable gift amount.
Imagine non-monetary solutions. “Just because the need comes in the form of money doesn’t mean that the solution is necessarily financial,” says Wright. Maybe your neighbor needs a weekly night of childcare so they can pick up an extra shift. This non-money route is preferable; research shows when relationships turn transactional, things can go south: Money can easily remove intrinsic motivations, according to research published in the Journal of Economic Behavior and Organization. Set clear boundaries, especially if the help is ongoing. Be crystal clear: “I’d love to have your kids over for dinner and movie night, from 3 p.m. to 10 p.m., on Saturday nights through the end of the school year.”
If you do give money, don’t expect it back. Your priority is the relationship, not the loan, if you called it that, rather than a gift. If you’re not OK with this reality, don’t loan money. “Just really mentally be prepared that you’re not going to see this money again, because otherwise it creates such problems in friendships and families,” says Dana Levit, owner of Paragon Financial Advisors in Newton, Massachusetts, who says that among the loans she’s seen her clients make to loved ones, they “almost always go badly.” If you structure it as a loan, consider making it interest-free. No one loves and trusts a bank.
Don’t go small. If you give $10, the recipient may conclude that you think that she can’t even afford $10. “It threatens her sense of status, especially in relation to the giver’s status,” Donnelly says.
Don’t pay off a specific bill. “It might threaten someone’s sense of autonomy, because a decision is being made for them”—and it’s embarrassing to not be able to pay the electric bill or a kid’s tuition, Donnelly says.
Frame your gift as saving time. Classy, important people are busy; there’s no shame in time scarcity, says Donnelly, who has researched the matter. Rather than presenting a cash gift, instead try, “I know time is tight for you, so here’s a grocery delivery certificate, to make your time easier.”
Give it as a surprise. “Gifts that are surprises are the most positively received,” Donnelly says, because recipients least question the giver’s motives. Text at 10 a.m. that a pizza delivery is arriving for the whole family at 6 p.m.
Buy an item or service. Both sides might feel more comfortable if the money purchases an unused household item, or a service from the recipient. Tread carefully here: It has to be an item that the recipient genuinely doesn’t mind parting with, or service (editing, lawn care, etc.) that the recipient would enjoy providing. My $2,200 technically purchased a wood carving . . . which I have yet to pick up. “That’s an awesome way to structure it,” Levit says. “That way the recipient isn’t indebted, and the giver is getting something that feels good.”