Sir Winston Churchill said, “we make a living by what we get, but we make a life by what we give.” With the tough economic environment that we are experiencing you might be one of the many South Africans that is in the difficult situation of supporting your parents, children, helping some extended family members and even friends. It is great if you can help your family or friends, but you cannot jeopardise your own financial situation. When it comes to your loved ones it might be difficult to have boundaries. You need to pause and carefully consider how to help them. Try to see the situation in perspective.
Before offering to assist, carefully consider whether this will be a temporary or permanent situation. If it is a temporary situation, cash can be a solution. If you are concerned that cash will be spent on bad habits or be irresponsible used, the provision of a grocery voucher or paying their bills directly to the service provider might be a better option. You will need to be very clear about your own financial situation, since expecting your help can easily become a habit.
If budgeting is the problem, you can assist and guide them. Helping your adult children whenever they have a cash flow problem, might be encouraging the problem without treating the root cause. It is unreasonable of adult children or other adults to expect assistance from a retired person. Exploiting the elderly is, unfortunately, common, as parents will often do anything to help their children. Pensioners, when considering lending or giving money to a family member, should seek advice from a Financial Planner. It is difficult to see things in perspective when your emotions are involved and you are concerned about the well being of others. The opposite is also true, before you accept help from others you need to ask yourself if it is fair.
If the situation is permanent, you might have to help them find a long-term solution. The elderly might have to give up their home, and move to a small bachelor flat in a retirement village. This transition can be very traumatic and help and assistance is always welcome, even if it is not in the form of financial assistance. If it is your parents you will need to budget personally for the expenses that you can take over, since you cannot jeopardise your own future financial plans or even worse help others by personally going into debt. You also need to consider the fact that your parents could become dependent on you when you take over specific and ongoing expenses, such as medical aid premiums. It is probably better to help your parents by buying them clothing seasonally or when they need or/and to help with grocery purchases when you can. Even though it might be more cost effective to have your parents live with you, it is a serious and long-term decision that would have to be carefully considered and discussed with your spouse and any other affected persons.
If it is elderly parents that require financial assistance it is important to involve all the adult children. Unfortunately, this is also a situation that can cause conflict amongst siblings. There should therefore be a clear understanding between them as well as realistic expectations as each sibling does not have the same financial means as the other siblings.
Before giving a family member a loan or signing surety on a loan, you need to consider the value of your relationship, since non-payment of the loan will create an uncomfortable situation and can destroy your relationship. A loan to a family member is not always a good option. If you cannot give them the funds and forget about the funds you gave them, helping them financially might not be an option.
Some helpful tips when helping your family members financially:
- Consider if it is a once off problem, a regular occurrence or a permanent situation.
- Before you help you need to know the root cause of the problem. If it is bad spending habits you might have to help them budget and cut costs.
- It is always better to teach someone to fish as opposed to handing out fish.
- You can help by giving them a grocery voucher or paying their bills.
- Consider giving a once-off cash gift.
- Do not create personal debt to help others.
- Involve other family members.
- You can help them by finding ways to cut expenses, i.e. cheaper accommodation or schools.
- You can help them by giving them employment or helping them find employment.
- You can help by offering your own skills or professional services at no cost.
- Always make sure you have a clear agreement with them.
- Discuss your decision to help your family with your spouse.
- A loan or signing surety can destroy a relationship, and needs to be carefully considered.
- Most important, carefully consider your own financial future when offering financial assistance. Do not feel guilty if you simply cannot help.
Live with an open hand and always help others if it is possible for you.