Money Manners is 9honey Money’s weekly column that deals with money etiquette matters that can be the cause of many an awkward encounter. Submit your Money Manners questions to Jo Abi at jabi@nine.com.au
This week’s question comes from a 9honey reader facing a tricky family dilemma.
Dilemma: ‘My sibling has asked to borrow thousands of dollars’
My sister has asked to borrow $8,000. At first she wouldn’t tell me what it was for.
She has since said it is to invest in a business so she can work for herself and eventually leave her job.
Sometimes (Getty Images/iStockphoto)
My sister is divorced with two children. She works in an office and her job is secure.
I know she as been tired and stressed out lately from work and raising the kids, and I have the money to lend to her.
I just don’t know enough about the business she is planning to invest in, and I know there is a strong chance she won’t ever be able to pay me back.
I’ve leant her money in the past, a couple of hundred dollars here and there for groceries etc but this is the first time she has hit me up for this much.
We don’t have any other siblings and I don’t want her to ask my parents. But what should I do?
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Young people dining and having fun drinking red wine together. Happy group of friends eating and enjoying each other company. Lunch and red wine at home (Getty)Advice: ‘I’d encourage your sister to look at alternatives’
I understand you want to help and your desire to keep it from your parents. You sound like a fabulous sister and your family is lucky to have you.
Even though you have the money available and are willing to treat it as a loan or perhaps an investment, business comes with risk.
There is a decent chance your sister won’t be able to pay you back no matter how hard she tries to make the business work.
Before lending money to a family member, ask yourself: will their failure to pay you back ruin or end the relationship?
An attentive female soldier listens as her husband discusses something serious. (Getty)
If the answer is ‘yes’, I would have strong reservations about ever doing it.
In this case, unless your relationship is worth less than $8,000 to you, I would avoid it.
Personally, I avoid it. I only gift money, and basically kiss it goodbye. I don’t do lending to family because I’ve seen it break apart too many other families to risk it myself.
Instead, I’d encourage your sister to look at alternatives such as small business grants in her home state or even a lender.
These entities can assess her business proposal without the bias you inevitably bring through your love. If it’s a good idea, it’ll find funding eventually.
In the meantime she can look at whether she can save her way to the $8,000 instead given her secure job. If she’s struggling to save now, I’d highly recommend seeing a financial counsellor to get some help with budgeting.
Money is a difficult subject for families. (Getty)
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Got a Money Manners dilemma? Email Jo Abi at jabi@nine.com.au.
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