What’s the Best Way to Help a Family Member in Financial Straits?

When a family member or close friend is in need of financial assistance, your instinct may be to help immediately. However, financial experts advise taking a step back to assess your own financial situation first.

“It’s an emotional choice,” says A.B. Ridgeway, a certified private wealth advisor in Lafayette, Louisiana. “Let’s step back and make sure we protect ourselves, too.”

Here’s how you can support a loved one without jeopardizing your own financial stability:

“Start with knowing your own numbers,” advises Emi Gjini, a certified financial planner and founder of MyGen Planning in Chicago. “Check your own budget and savings. Make sure your emergency fund and retirement contributions are on track.”

Once you have a clear picture of your finances, you can determine how much you can afford to help someone else. “Pick an amount you won’t miss,” she suggests, ensuring you don’t derail your own financial goals.

You still want to be able to cover your own emergency expenses if you suddenly lose your job or face unexpected costs.

Offering a cash gift is often simpler, Gjini explains. While lending money is another option, the terms of repayment can complicate relationships.

A cash gift allows you to plan without the expectation of repayment, reducing stress and potential delays in your financial decisions. (In 2025, individuals can gift up to $19,000 per person without tax consequences.)

If your loved one seeks help borrowing money elsewhere, be cautious about co-signing a loan. If they miss payments, your credit score could suffer.

“If you’re planning a major purchase, like a home or car, co-signing could jeopardize your ability to secure favorable interest rates,” Reyes warns. This highlights why gifting cash can be a safer option than sharing credit.

If you choose to lend money, Ridgeway recommends documenting the agreement. “I suggest a contract that outlines the terms and conditions,” he says, noting that templates are available online.

“When money is involved, there’s often a lot of ‘he said/she said,’” Ridgeway adds. A written agreement clarifies terms for everyone involved.

Additionally, if they fail to repay you, having a written loan could allow you to potentially write off the debt as a tax deduction. Consulting a tax professional about your specific situation is advisable.

Sometimes, the best support is non-monetary. Ridgeway suggests offering emotional support, referring them to job networks, or assisting with unemployment applications.

“Practical help, like reviewing their LinkedIn profile or resume, can be more beneficial than giving them cash,” Reyes adds.

You might also consider buying groceries for the week, providing relief without a significant financial commitment.

Regardless of how you choose to assist, it’s crucial to establish clear boundaries to prevent the situation from spiraling out of control.

Setting limits on the type or amount of help you provide “doesn’t mean you love them less; it holds them accountable for their situation,” Ridgeway explains.

Otherwise, he cautions, people may take advantage of your generosity.

Gjini emphasizes the importance of ensuring you’re not enabling poor financial choices but rather helping them find a better path.

“Focus on long-term solutions. Ask yourself, ‘Will this help my sister move forward? Or will it enable a cycle?’” Gjini advises.

Establishing clear boundaries will “prevent love and money from clashing,” she adds.