New grad dealing with money requests from family - How to handle

(PLEASE READ MY LAST COMMENT IN THE THREAD FOR AN UPDATE. THANK YOU SO MUCH FOR ALL YOUR ADVICE!)

For the more experienced members on the forum (or just random opinions)
How do you handle money requests from family?

This is an obvious throwaway account so it can't be traced back to me.

My big sister - about 10 years older than me - is (or was) a doctor. She and her husband left everything and joined a non-profit a few years back, and moved somewhere in the third world where she worked as a doctor helping under-served populations. On a furlough visit back to the states, she got pregnant, baby (my nephew) was born extremely premature, had to go through multiple surgeries and they sunk their entire life savings taking care of this child. Nephew is doing well, is a toddler now and growing, but they haven't been able to raise enough money to cover an extra year in the states (needed as the kid needs monitoring) plus the next few years at their station. My parents have been helping them out but between that and my little brother's college tuition, my parents are financially exhausted.

I have been working for about a year in corporate strategy. While the base is not much lower than IB base & I live in a very low COL city, the bonus is measly compared to IB, which means that I'm definitely not making IB money. However I'm definitely comfortable and not complaining.

I was horrid at money-handling throughout college & incurred multiple debts. I have finally gotten my act together and managed to pay most of the important/high-interest ones off (like credit card)..all I have now is my car note. No student loans because of parents, scholarships & internships throughout school.

However, as a result of me paying all my debts off, my savings are meager - but my financial situation is finally looking up. I'm building a decent nest & am already maxing my 401k (employer match) - all the good things.

Out of the blue yesterday my sister asked me for a 5k loan - repayable in a year - to help them with certain housing related issues. If I give this to her, I'd basically be out of my emergency savings and would be in a very precarious situation if anything happened to me, my car, my job etc.

I told my parents (and just my parents) how much I made when I got the job, but my mom told my sister, who now expects me to help her since "you make good money and have no dependents."

This is obviously a slippery slope, but how do I strike the right balance of being generous (plus I love my nephew) but also looking out for myself and stopping a potentially harmful habit (family asking money) in its infancy. My girlfriend thinks I should flat out refuse & ask them to take a loan at the bank.

WSO is filled with financial wizards - I have no mentor other than my dad I can talk about this to that's also financially savvy, so strangers on the internet will do.

Comments (46)

Jan 30, 2019

Don't. Tell them to get a loan. They're adults.

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Jan 30, 2019

Dude...you should just give her the money, no questions asked. This is family, your blood...i would do anything for any of my family in times of need

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Most Helpful
Jan 30, 2019

Before insurance, family was our insurance. It does not sound like your sister is addicted to drugs, she sounds well educated, and she sounds like a pretty good person generally, lacking greed, she decided not to become a millionaire in the U.S (being a doctor for an extended period of time in the U.S. will get you there) in order to help people individually who cannot help themselves, we can make arguments about whether that was a good choice on her part or not, but the bottom line is, that was an extremely generous way for her to spend her life. Your nephew, unfortunately, it sounds like your sister did not have good insurance at the time of his birth (due to above mentioned revocation of cushy U.S. life) .... this was a cause your parents have already devoted financially to, your parents contributed financially to your education... in that way you are a little indebted to your parents (instead of student loans, etc.)... anyway, this does not have warning signs to me, $5,000 is not significant, your sister will either pay you back, or, you chalk it up as "well my parents would have given it to her, and they funded at least that amount of my education, so it is whatever" you give her the $5,000 and you will learn if she is trustworthy, if so, you grow closer, if not, at least you were not the one with the lack of trust and you learn that she is not trustworthy.

EDIT: Advice my dad has given to me: "anytime you give someone you have a relationship with a personal loan, go in with the expectation that you never see it again and make sure that would not negatively impact your relationship, then you will be nothing but pleasantly surprised, or have your original expectations met"

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Jan 30, 2019

You made some great points, especially regarding the fact that this is as much a gift to my parents as it is to her.
Problem is - which you covered in your edit. If I got laid off tomorrow and I gave them this money, I'd have no way to cover more than a month of my apartment/car/food costs.

Jan 30, 2019

Throwaway, I would have a conversation and repeat exactly what you just said,

Throwaway12339094:

If I got laid off tomorrow and I gave them this money, I'd have no way to cover more than a month of my apartment/car/food costs.

That being said there is probably an amount that pushes your risk tolerance while helping out when your family is in need.

    • 1
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Jan 30, 2019

Your sister's bad risk management is her problem. Tell her that she has every avenue to get a loan that you do. If she can't understand that, you won't see a dime back, ever.

If you give her money, she'll be back. She and her husband made some very bad decisions (financially not morally). They weren't prepared for the worst outcome. You must be prepared for the worst outcome (non-repayment).

Tell her no if you feel uneasy about your state/status without the emergency fund. Only give it to her if you "mentally write it off."

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Jan 30, 2019

Yes. I run the risk of her being offended and not talking to me. That would suck, I love my nephew & would hate not being able to see him.
However, as I said above I got laid off tomorrow and I gave them this money, I'd have no way to cover more than a month of my apartment/car/food costs - so this is what is really holding me back.

Jan 30, 2019

You should ask if 1-2k would be enough. You have previous commitments. If she cannot understand that, do you want to be loaning her money?

Jan 30, 2019

.

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Jan 30, 2019

with firms like SoFi, I don't see the need to borrow money from family unless you can't qualify for it on your own credit. that's a really shitty thing for your parents to say, that just because you're making good money you should help her out,

this is one of the hardest things about young adulthood that no one really preps you for: you will see your family's true colors. they put on a facade in your formative years (if you're lucky), but they will show you who they really are now. if all they see you as is a financial cushion, I'd try to keep them at arms length.

quick question: when your sister asked, did she say she's maxed all of her credit cards, tried getting a loan through a bank, and that her husband has asked his parents for help? the other thing she could try is a hardship withdrawal from her 401k for medical expenses or a 401k loan. all of those options ought to be on the table before a personal loan. if I were you I'd say "I'm not really in a position to do that right now, but have you thought about taking a 401k loan, a hardship withdrawal, or one of those low cost loan places like SoFi?"

and then see what she says. I suspect she wanted an easy interest free loan without the pressure to repay and sees you as the easy lender

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Jan 30, 2019

Thanks for the great points thebrofessor.
The part about financial cushion is something I wonder about. For my little brother (college freshman), I don't care, I give him drinking money every other month - I'm just a year removed from college, I know how much money you waste on booze and girls in first year so it can get and I have no problem with the occasional $100/$200.

This case is obviously different, as my sister's is a much bigger ask plus we have a different type of relationship.
I know her, we fight all the time due to both being Type A types. She'll be extremely offended by me prying & asking about whether she's maxed her credit cards etc. She also dislikes her husband's parents & I feel that she wants to have as little attachment to the US as possible so she's able to go back to her non=profit.

Jan 30, 2019

what I meant was did she tell you she exhausted all other options and you're her last chance at getting the money? I'd guess that you're not, she probably has some sort of retirement plan that allows for hardship withdrawals or loans, so she should do that first, then take out a personal loan from a place like SoFi, and then if that doesn't work, then come back to you.

Jan 30, 2019
throwaway12339094:

& I feel that she wants to have as little attachment to the US as possible so she's able to go back to her non=profit.

This is where I'm struggling. Being able to chuck it all to go work abroad for a non-profit is, in some sense, a luxury. That's not to say she shouldn't be commended for sacrificing and doing good work. But now, she and her husband brought another life into the world, and supporting that life financially needs to come before everything else, including her passion project. Maybe she doesn't want to shift back to the financial safety of a US-career, but expecting you to sacrifice so she doesn't have to... I don't know. Maybe I'm not looking at this the right way - just thought I'd toss one more perspective in.

But the most important advice you've already gotten in this thread is mentally writing off this loan the moment you give it, if you do so.

Perhaps, given your legitimate emergency fund concerns, you get a better understanding of exactly when your sister needs this money. Maybe she could do with $500/mo instead of a lump sum $5k immediately? That would possibly allow you to divert some funds without depleting everything and putting yourself into precarious financial shape.

Jan 30, 2019

You aren't loaning her the money, you are giving her the money. If that's comfortable to you, you should do it but probably on a one-time basis. My brother is in a similar spot and personally I wouldn't feel great about leaving him out to dry for a measly $5k. However there is a limit; if he asked for $50k I would say no.

Jan 30, 2019

this ^ big difference between $5K and $50K give what you can, learn more about your relationship with your sister, and plan to never see what is given again.

Jan 30, 2019

I agree with your comment. In a couple years & after a couple bonuses 5k will be nothing to me. At this point, it's a large chunk of all the savings I have however.

Jan 30, 2019

I'd do it. Either she pays you back and thats that, she doesn't but clearly tried, or she stiffs you. Regardless, you will learn if you can really trust her or not.

Jan 30, 2019

I'd say try to give 1-2k. Lowers risk and you still learn about your sister's intentions/relationship with you.

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Jan 30, 2019

1k is a good suggestion

Jan 30, 2019

is your sister living with your parents? what are their monthly living expenses?
are they making frugal living choices?

and most importantly....exactly how will they earn the money to repay the loan?
12 months doesn't magically make money appear...you have to have a plan..and its got to be realistic.

Perhaps instead of loaning a lump of cash...you could pay for certain things directly (here is $1,200 for pre-school...ect..). That way, you feel comfortable with the accounting of the spending...and if need be...you will know exactly what gift you gave.

just google it...you're welcome

Jan 30, 2019

No, but she's living close to her husband's parents - who have a nice, vast typical upper middle class house. She's extremely proud & dislikes her husband's parents however.

If I ask about the monthly living expenses etc..I know she'll make a big deal of me thinking I'm "above" her & treating her like a charity case or the world bank etc etc..Just a rough convo to have

Jan 30, 2019

It surprises me a little that your sister displays this behaviour. I would think that the experience working in a developing country and having had a preterm birth would have made her a humbler person. Maybe she actually is and you are projecting this on her. I don't know. I know that in these situations I tend to focus on the bad things that could happen. But people often turn out to be more considered than I expected. Maybe try to thin

Jan 30, 2019

Given that you would have no safety net should you lend the money, I would find the most sincere way possible to try and explain that position to her. I don't think it is worth jeopardizing your security for any others, even family. I might take flack for that, but that's just me. Should you have had more in savings, it might be a little different.. but tread with caution and don't expect a penny back

Cultivating mass and wealth since '95

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Jan 30, 2019

@throwaway12339094

That's a rough post to read. I am very family focused, and have both lent and received loans from my siblings from time to time, so my instinct was at first to say "just give her the money. If she pays you back in a year, that's icing on the cake, but don't expect it" like many here.

However, the whole you telling your mom how much you make, your mom telling your sister, and your sister then telling you that you should be expected to give some of that to her all rubs me the wrong way. It seems gross, taking a gift out of the generosity of your heart and twisting it into an expectation or obligation.

Anyhow, if you're set on lending it and worried about your emergency fund, I would see about paying it to her over time. Perhaps she does not need to spend all $5,000 immediately.

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Jan 30, 2019

"your sister then telling you that you should be expected to give some of that to her all rubs me the wrong way."

Me too, initially. But the actual wording of her request wasn't given. Looking at this from another perspective, in a situation of distress she turned to her brother whom she trusts and loves. No one knows what she actually thinks. You can only find out by giving her the money. So if I had to make this decision I wouldn't focus on what I expect her to do (unknown). I would focus on myself. What is my situation? Would I be willing to face the consequences of giving / not giving her the money (four outcomes to consider,in my opinion: giving & not receiving back, giving & receiving back, not giving & still family, not giving & no family anymore)?

Also, I'd suggest that when you're having the conversation with her you start with something positive like I mentioned above. When you give her an opportunity to let her guard down it might help to make her more understanding of your situation.

"would see about paying it to her over time."

Good idea. But it might lead her to expect an ongoing commitment. I don't know.

Jan 30, 2019

In addition to the points discussed above, I think it's worth noting--you mentioned your sister is a Doctor.

Does she still have a valid medical license? What would be the cost for getting it back up to par? An MD/DO is a very valuable asset; in addition to your sister working for a hospital or going into the private sector (a private practice), your sister could consult for a lawyer (Medical Malpractice), potentially explore Patent Law as an Analyst, work for a Start-Up, Pharma Company, IBank in ER/Banking (obviously she would have to learn Finance), a HF, a VC/PE fund, the list goes on and on.

I understand that family is important, but is your sister doing everything in her power to earn? I commend your sister's drive to work for a non-profit, but she has to utilize all the tools/resources at her disposal to earn, and I think an MD/DO could help her to do that. Working at a non-profit was a conscious decision your sister made, and now it's time for her to reassess given her situation.

I'd personally try to have that conversation with your sister, and if possible, help to facilitate some introductions to industry. The bottom line is that you're young and you have to look after yourself, and that doesn't include just giving her all your savings. If she's on the verge of severe financial distress, try to compromise and help her out, but:

1) Be sure that you're not screwing yourself in the process because rainy days do come
2) Be sure your sister (and her husband) are doing everything in their power to create the most opportunities for themselves fiscally (especially since she is a Doctor)

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Jan 30, 2019

Thanks for the insight. Many good points. To address the questions regarding what she's doing:

My sister wants to avoid setting down roots back home. She feels that if it happens, her and her husband will never leave & will get comfortable (this is my deduction). It's been a point of contention in their marriage & me asking will definitely set her off.

As a result, she's looking for an easy part-time job that is not good enough to make her consider staying here full time, but enough to help with bills.

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Jan 30, 2019

This is a big red flag though, man. She is/was a doctor. Why is she looking for part-time jobs to "get by?" Why is she not getting hired at local hospitals or clinics?

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Jan 30, 2019

Firstly, only give money you are willing to lose.

Secondly, do you trust her to pay you back? Would you be able to make it Amortizing (That said this will likely never work in practice).

Finally whats the money for? Maybe ask for their bank statements to judge how they are spending their money albeit this is kinda dickish as it is family?

If it was my brother I would give without question but I have deep trust in my family and I dont know if you are the same or not. But I would never give a loan to anyone if I wasnt willing to lose it all.

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Jan 30, 2019

Long ago I remember reading about some billionaire that lent his in-laws some money and even had the audacity to get a notarized repayment note with a stated rate of interest.

Guess that's what it takes to become a billionaire.

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Jan 30, 2019

it's not that crazy, I've had clients do this with their own children, the children end up thanking them years later, because it caused them to mature financially

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Jan 30, 2019

Why "audacity"? maybe he knows something about his own in-laws that you don't....

Jan 30, 2019

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Jan 30, 2019

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Jan 31, 2019

Thanks for all the comments every one.
WSO really is an incredible site.
There are so many steps in a young professional's life no one ever warns you about.

As an update,
I will give my sister 2.5k. It's a little risky for me, but it gives me a bit of latitude. When bonus season (nothing like IB, much much less, for the record) hits, I'll see if I can give her more.

Regarding her situation,
1. She found a job - doesn't pay much, but it's something she doesnt hate .She'll be teaching MCAT courses
2. Her mother in law invited her to come live at her house way out in the suburbs which would be extremely far from her job - in a very formal, slightly condescending letter. her husband wants that option. This led to another huge fight
3.She left their downtown appartment with the baby and slept at a hotel last night. Marriage, which was so happy a few months ago, seems to be heading towards an iceberg.

This has got me worried about the future, obviously. But we'll see.

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Jan 31, 2019

I can't believe some people in here are actually telling you that your sister's decions are noble. Charity starts in the home and your sis is completely irresponsible with her life choices when she has a young son that she can barely take care of.

You can kiss your $2.5k goodbye, but that's not really the issue here. It sounds like your sis has some serious mental/emotional issues to deal with, and she should probably get professional help. This looks like a trainwreck waiting to happen.

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Jan 31, 2019

Agreed. She obviously has issues and doesn't understand that her charity work should come second to the child's needs... and he needs to be supported financially first. JFC idiots these days

Feb 3, 2019
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Feb 3, 2019