Reader letter: 'We never see the borrowed money again'

A Money reader is seeking advice on how to manage requests from his family for money against his own household needs. Maverick writes via email: I am married with two young, school-going children. Both my wife and I work but it is tough financially and we're barely making ends meet. We both have family that struggle, and everyone seems to think we are in a position to help. We never see the "borrowed" money again. How can we say no, avoid us going further into debt and not strain our relationships with close family members? This is a real struggle and any advice will be welcome.

Shepherd Silayi, Senior Debt Review Manager at National Debt Advisors, responds:

Firstly let me commend you on your humanity displayed in helping your struggling family members. Since you have your own family too to support, it cannot be easy. 

Yet, admirable as it may be, it simply is not wise, nor sustainable. You and your family are going to come off second best if you continue on this path, and that simply is not fair on your household.

The “sandwich generation” and “black tax’ are well-known terms used for the situation you’re finding yourself in. Let me assure you that you are not alone. The need to help our parents and siblings once we have a job and steady income, is an intrinsic part of many young and middle-aged South Africans.

Every day, we try and help over-indebted consumers find solutions to their bad financial situations -  and it is clear that financial dependency from family and friends is undoubtedly adding to the financial strain of many. Our research shows that nearly 75% of all economically active South Africans are contributing to the upkeep of their parents and/ or siblings – with the majority having families of their own to support.

South Africans are struggling with their debt. Of the 25.7 million credit active consumers, nearly 10 million are behind with payments in some way or the other. Now, this begs the question – if we are not able to manage our own finances and afford our own debt repayments and living expenses – why are we lending money we don’t have to family and friends who will in all likelihood never repay us?

Firstly, you must acknowledge the full scope of your financial situation. This includes facing up to the fact that unless you have a large emergency fund and ample retirement savings and investments, you are doing your own family a disservice when lending money.

Think about this for a second: If you are giving away money instead of saving it, you are perpetuating the cycle of dependency, and when you are old, you won’t have a nest egg and your children will have to take care of you.

Saying no, can be hard, but it isn’t impossible. Here are a few tips which can help you when borrowers come knocking.

• Say no – without getting too personal. Make your response financial and not emotional.
• Be firm and straightforward in telling people that you are struggling too, and simply cannot afford to lend them money.
• Find out what they need the money for and offer to help them on that front instead, for example if they need it for school fees, offer to write a letter to the school explaining their situation, or perhaps accompany them to the school.

Lending money seldom ends well.  Rather avoid it and invest whatever spare cash you may have in your household, your family and your future.

* Send your personal finance questions to money@arena.africa