How to Stop Enabling Financially Irresponsible Family Members

Dealing with the Financially Irresponsible

Giving financial help to a family member – especially if it’s yet another cash payment earmarked for an adult child – may seem like something parents, siblings and relatives should do for each other, if they’re able.

If we can help, we should, right? Better to give than receive and all that. And if we need help, why should pride stop us from asking?

That’s hard to argue, but giving financial support to family members, even with the best intentions, can become risky business if parameters aren’t established.

A CreditCards.com poll published in May 2021 traced the family-related financial help that has spiked due to the Covid-19 pandemic. The survey showed that 45% of parents helped their adult children financially and that 79% said they shared money they would’ve used for their own personal finances.

The parents who helped their kids financially on average gave them $4,154.

Unusual circumstances like a once-in-a-generation economic shutdown are a good time to offer a financial boost. However, if the warning signs of financial irresponsibility already exist – and mutually understood limits on your economic support don’t exist – you’re not doing yourself or those loved ones any favors.

In fact, the financial help you provide can become a huge hindrance that endangers the most cherished relationships in our lives and the recipient’s chances of becoming financially self-sufficient.

When Help Becomes Enabling

To be clear, there’s a difference between helping someone through a rough spot and feeling as if your generosity has opened a floodgate you need to close for the benefit of both parties.

For instance, a friend went through a divorce and was getting remarried when — in addition to paying child support and alimony — he discovered his second wife was bringing a balloon loan car payment into the marriage. She’d taken out the loan right out of college when her own father refused to co-sign with her, and she hadn’t understood the loan terms.

My friend shared that unsettling information with his parents, who offered to pay off the second wife’s loan. He resisted. They insisted. Over time, he paid them back. It was a one-off transaction that he was thankful for and says he felt guilty about for years to come.

The good news is that the help didn’t become problematic for either party.

The danger we’re talking about is when help becomes a habit. Someone asking for a rare financial favor turns into someone who expects assistance whenever a bill needs paying.

Dealing with financially irresponsible family members is never simply resolved by opening your checkbook. In fact, which should be down the list of steps you take when confronted with a request for financial assistance.

Signs You Are Financially Enabling Someone

It’s important to know when financial support moves from aid to addiction. Consider these signs:

• You give your children large cash gifts regularly. People should learn to live within their means, and not be dependent on income that might not always be there. It’s called living in a false economy, and it can sabotage financial responsibility.
• You offer cash without discussing how it will be used or how it will be paid back. The less specific the answers, the louder the alarm bells.
• Is it a gift? A loan. Discuss.
• If it’s for an emergency, have a real discussion about how similar situations can be managed in the future, perhaps by building an emergency fund for unexpected expenses.
• Is the person willing to accept non-financial help such as transportation while a car is in the shop or dinners at your home that could help cut down on their food bills? If they say cash is the only solution, be wary.

Tips to Take a Stand Against Financially Irresponsibility

That headline may sound like advice to climb up on a high horse and deliver a lecture. It’s not. In fact, condescension should be avoided.

Addressing financial irresponsibility, whether it involves an adult child or a family member, means taking a stance that is both fair and well grounded.

• Mutually review how much money you’ve already lent or gifted. Don’t let the discussion veer off point or delve into “whataboutisms.” What about the help you gave another child, for instance? It’s not pertinent to the discussion. Your relative financial security or wealth shouldn’t be a factor in how often you’re willing to help or how much you’re willing to gift or loan.
• You can assist without enabling. Does the borrower need credit card relief? A nonprofit credit counselor or debt-management agency can provide long-term answers that your money almost certainly will not.
• Insist on seeing the borrower’s budget for how they’ll pay current bills and manage future emergencies. If you’re giving money, feel free to ask for a detailed plan of how it will be spent.
• Avoid loans if you can. Nothing fractures relationships more than loans going unpaid. That goes for friends as well as family members. If you don’t feel you can afford a gift, don’t give the money. Offer non-financial support and help.

Avoiding Financially Complicated Relationships with Family

This is the classic two-way street. There are few relationship dynamics as fraught with peril as borrowing money from friends or family.

• If you’re the borrower, do a full review of why you need help. Is it because of a calamity like job loss or unforeseen medical expenses? Or it is for something expensive you want but don’t necessarily need?
• Money isn’t free whether you’re borrowing from a bank. The same rule applies when borrowing from a family member. Investigate bank rates. They may not be as taxing as you imagine, and the repayment terms may be within your budget.
• B-U-D-G-E-T! There’s that word again. Make a budget.
• If you’re going to lean on a parent, sibling, or other family member, share that budget with them and fully explain how you are going to put their gift to use.
• Neither party should let anything go unsaid or risk a misunderstanding. If you’re giving money to a family member or friend, don’t be shy about expressing your expectations.
• Give a cash gift only after telling them that this is what you can afford (you’re still paying your own bills after all) and that giving them money cannot be a continuing occurrence.
• If it’s a loan, consider both sides signing a personal contract that includes repayment terms.
• Barring a signed contract, create a bill-paying plan with your family member.
• Give family members gift cards if you are uncomfortable with cash. It’s one way to focus your help in an area of clear need.
• If you have misgivings about handing them cash, offer to pay off a particular bill or bills for a specified period of time.
• Gift cards aren’t the only form of non-cash assistance. You can help family members find local resources they might not be familiar with, whether it’s an employment agency, welfare assistance, charities that assist with food, rent or utility bills or similar services or programs that might fit their specific situation.

After all, financial transactions among family members can be slippery slopes. Sometimes our feelings and emotional attachments prevent us from honestly acknowledging the difference between a loved one facing a rare financial emergency and one who has become too comfortable with asking you to solve his or her latest money issue.

So, it’s best to have a plan and stick to it, especially when dealing with financially irresponsible family members.

The best help you might give them is a referral to an experienced nonprofit credit counseling agency.

There’s a proverb that says, “in times of test, family is best.”

For sure, family is best when it supports and assists, but not when it enables.

Resources for Providing Financial Independence

The most effective way to help family members or friends overwhelmed with money problems would be to increase their financial literacy.

Knowing how to make smart financial decisions, live on an affordable budget, and save money for emergencies are learned skills that can be picked up by reading articles like this:

• Personal Finance Education
• Free Financial Literacy Resources for College Kids
• Financial Literacy Workshops and Webinars