Dealing with a Financially Irresponsible Family Member

When faced with a loved one in financial distress, our inherent nature often compels us to assist. The idea of co-signing personal loans or giving direct financial support becomes tempting, especially when it seems like the right thing to do. However, giving financial help to a family member, especially in the form of another cash payment to an adult child, or agreeing to them taking personal loans with a cosigner—you—can be a complex decision. 

It’s based on the age-old adage that if we can help, we should – after all, it’s better to give than receive. Furthermore, if we’re in need, we shouldn’t let pride hinder us from seeking assistance. Yet, while this generosity springs from a place of love and compassion, the complexities of financial support within a family setting can turn it into risky business if not approached with clear boundaries and understanding.

Setting Parameters is Crucial

Supporting a family member monetarily is more than just handing over cash. It’s an emotional commitment and can be a reflection of trust. Before entering into any financial agreement, even with a family member, it’s vital to set clear parameters.

Here’s why:

  • Preserving Relationships: Money has been the root cause of countless strained family relationships. When clear terms aren’t established, misunderstandings can easily crop up, leading to resentment and strained ties.
  • Financial Safety: By setting parameters, you ensure that you’re not endangering your own financial well-being. After all, you can’t help others if you find yourself in a similar predicament.
  • Teaching Responsibility: Continually bailing out a financially irresponsible family member doesn’t teach them fiscal responsibility. Instead, it can perpetuate a cycle of dependency.

Considerations Before Giving Financial Aid

If you’re contemplating helping a family member financially, keep the following points in mind:

  • Transparent Conversations: Before any money exchanges hands, have a transparent conversation about expectations. If it’s a loan, discuss repayment terms, interest, and what happens if they default.
  • Document Everything: Even if it feels formal, especially with a family member, it’s wise to document everything. This not only serves as a reminder of the terms but can prevent potential disputes in the future.
  • Evaluate Your Own Financial Health: It’s essential to review your own finances before committing. Can you afford to give this money? Will it affect your financial goals or retirement? Be honest with yourself and your family member about what you can and cannot do.
  • Avoid Co-signing Loans Blindly: Including personal loans with a cosigner can be particularly dicey. When you co-sign, you’re essentially vouching for the borrower. If they default, you’re on the hook. Ensure you trust the family member’s ability to repay the loan and understand the risks involved.

Alternatives to Direct Financial Aid

Direct financial support isn’t the only way to assist. Sometimes, guiding a family member towards better financial habits can be more beneficial in the long run.

  • Financial Counseling: Encourage them to see a financial counselor or take a money management course. This can equip them with the tools they need to be financially independent.
  • Gifts Instead of Loans: If you’re in a position to give without expecting repayment, consider making it a gift instead of a loan. This can avoid the complications that loans bring into relationships.
  • Assist in Non-Monetary Ways: Sometimes, the best assistance isn’t money. It could be helping them create a budget, offering childcare so they can work, or guiding them towards job opportunities.


Supporting a family member in their time of need is commendable, but it’s essential to approach the situation with a mix of empathy and pragmatism. By setting clear parameters, keeping lines of communication open, and considering alternative forms of support, you can ensure that your assistance truly benefits your loved one without jeopardizing your relationship or financial well-being. Remember, it’s not just about providing a temporary fix but fostering long-term financial responsibility and independence.