How to Balance Helping Your Family and Look Out for Yourself Financially
Supporting your loved ones and tending to your money matters can feel like a tall order. Here's how you can balance helping your family and stay on track financially.
Photo by Pille Kirsi on Pexels
How to Balance Helping Your Family and Look Out for Yourself Financially
Juggling different financial priorities and covering day-to-day expenses for yourself is hard enough. But what if you're helping out loved ones with their money situation?
Financial experts across the board recommend "putting on your oxygen mask first," Still, it's hard to disregard a close relative or family member who seems like they need help. Here's how you can balance your own needs and goals and while also helping loved ones:
Set up a family fund
Helping family members is more common than you might think. According to recent U.S. Census data, about 4.3 million Americans helped their parents financially. And about 2.4 million parents received a median of $3,749 a year from their adult kids.
Think of a family fund as a twist on a traditional emergency fund. Start by stashing away what you reasonably can afford each month. Or, consider squirreling away a percentage of small windfalls—tax refunds, work bonuses, birthday gifts—toward your family fund.
And like traditional emergency funds, lay out under what circumstances you feel comfortable drawing from your family fund. Maybe it's to help your aging parents cover their bills or put food on their table amid rising inflation. Or maybe this money is reserved for those 911 scenarios, such as your sibling facing eviction or losing their car due to missed payments.
Once you've depleted the funds in your account, that's it. You won't be able to help until you replenish this savings account.
Do annual financial check-ins
Regularly check in on your personal money goals to ensure you can balance your financial needs while helping your friends and family.
- Do I have enough in my emergency savings?
- What's the progress I'm making with my credit card debt repayments?
- Am I on track for retirement?
- How am I doing with my other saving goals? For instance, saving for vacation, kids' college fund, a home, car, investment property.
Seeing where you're at financially with your goals can help ensure you're making steady progress. It will also give you an idea of whether you can continue supporting your family. If you're stretched thin, it might be time to scale back.
Establish boundaries and expectations
Consider your boundaries and how comfortable you are helping your relatives or parents. Maybe you'll help them with day-to-day bills or only when they're in a financial pinch. Set caps on how much you can help.
If you're offering a loan, make your expectations for repayment clear. Do you want them to pay you within a certain time frame? Laying out the terms might feel awkward, but you'll want to establish them from the get-go.
It's one thing to establish boundaries. It's another to enforce them. Once you've communicated what you can and can't do regarding financial assistance to loved ones, make sure you hold firm to your boundaries.
This might be particularly trying during hard times for your friends and family, but it's crucial that you protect yourself. Otherwise, it could hurt you financially, or stir up ill feelings and resentment and cause a rift in your relationship.
Know when it's better to direct them to resources
Depending on the situation, it might be more beneficial to help those close to you in need by pointing them to resources. For instance, a relative has lost their job and is asking for help. In that case, maybe there's a free or low-cost job training program in your area. You'll want them to get back on their feet and be self-sufficient, versus relying on you long-term.
Bottom line
Balancing your financial priorities with those of family members can feel like a tall order. The goal is to ensure that your money situation doesn't suffer and that you can afford to juggle both. Otherwise, it's a losing scenario for you and those trying to help.
Get your FICO® Score from FICO, for free. No credit card required.
Jackie Lam is a personal finance writer whose work has appeared in Salon, Business Insider, and GOOD.