If you’ve already started brainstorming about your holiday gift list, then you might also be considering whether or not to give money to family members. But giving cash can sometimes unleash complicated emotions and even tension. Here are five strategies that can help you give — and receive — funds without straining any relationships:
First, decide if you can afford to give help. Sometimes parents don’t even realize how much money they’re giving their grown children and the degree to which it’s cutting into their retirement savings. Financial advisors generally urge parents to put their own retirement savings first, particularly before college tuition, in order to protect their own financial security.
[Read: How to Talk Honestly About Money With Your Family.]
If you can’t afford it, consider saying no to any requests. Declining a request for help, while painful, is sometimes the best decision a person can make, especially since many loans are never repaid. Financial experts recommend making your financial security a priority, especially if you’re in a financially vulnerable situation yourself, like approaching retirement.
If a relative asks for money unexpectedly, you should stall, suggest Jeanne Fleming and Leonard Schwarz, authors of “Isn’t It Their Turn to Pick Up the Check?” What you blurt out at first might not be what you really want to say, Schwarz says. Then, be sympathetic but firm. “You want to be unequivocal. Don’t say, ‘This is a bad time,’ or they’ll ask you again next week,” Fleming adds.
If you receive money, be aware of what might be expected in return. Donald Cox, professor of economics at Boston College, says people who give or lend money to relatives are usually motivated by altruism, but they may expect something in return. For example, if a parent gives money to a child for a down payment for a house or college tuition, the parent may expect assistance later. “Many adult children who are providing care for needy, elderly parents say they are doing this out of a sense of reciprocity,” he says.
[Read: Parents Give Kids $1,360 in Cash Each Year.]
Spell out the terms of any gifts or loans. If parents decide to give their children money, Eileen and Jon Gallo, co-authors of “The Financially Intelligent Parent,” recommend discussing the details in advance, including whether the money comes with strings attached. For example, if money is earmarked for a car, can it be any type of car? If the money is a loan, when should it be repaid, and at what interest rate? (If the rate is below the one set monthly by the IRS, it may need to be treated as a gift, which can have different tax implications.)
Putting the terms of any loan in writing, including the interest rate and schedule for repayment, can help avoid misunderstandings. As you write the document, you have the chance to talk through details and any expectations or strings attached to the money.
Look for nonmonetary alternatives. If money is tight, consider a different way of helping out a family member. Perhaps the relative could live with you for a short period, share regular meals at your home or you could offer baby-sitting services for any children. If you have a specific skill, like a technical proficiency, then you could offer to help a family member build her social media or LinkedIn profile to assist in a job search. You can also just offer emotional support and listen to the family member as he works through his next steps. Sometimes, that kind of help is even more valuable than cash.
[See: 10 Money Questions to Ask Your Parents.]
If you do invite a family member to live with you, then you might want to consider writing out a document explaining the terms, including any expectation of a move-out date, rent contributions or assistance around the house. Figuring out these details in advance can even help parents with their adult children who move back home after college and help reduce the chances of conflict.
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Tips for Giving Money to Needy Family Members originally appeared on usnews.com
