Senior Finance: Setting Boundaries When Lending Money

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As a senior, it can be very tempting to lend money to your family and friends when they need it. You want to see them happy and know that they have the things they need. However, you have important wants and needs to consider as well— including making sure your finances will last throughout the coming years and ensuring you will have enough money to cover your bills in case you experience a medical issue or require caregiving in the future.

Many seniors have a limited income after retiring. Therefore, they need to be careful with the amount of money they spend as well as lend out to their family, friends, and neighbors. To protect your financial security, use these tips to create a plan for lending money and setting boundaries so that you can protect yourself from future financial difficulties.

1. Put Your Own Financial Needs First

When it comes to deciding whether or not to lend someone money, put your own financial needs first. You must be able to buy necessities, pay for housing and utilities, manage any debt you may have, and pay for insurance. You will also want to put some savings aside for medical emergencies.

If a family member wants a loan for something important and you would like to help them, figure out if any of your regular spending habits can be temporarily put on hold so that you can provide the loan for your loved one.

2. Know What You Can Give

According to Senior Living, seniors can typically live comfortably on about 80% of their pre-retirement income. For instance, if you made $100,000 a year before retirement, you will likely be comfortable on $80,000 a year after retirement. [1] When deciding if you are going to loan your loved one money or not, it helps to know what you can afford to give. Once all your basic needs are met, figure out what you have left over to spend. You may find it helpful to visit a senior financial advisor to help you with this task. They can help you figure out your total income. Then you can add up all your regular expenses and subtract it from your income. Once you know what is left, you can determine what you want to do with the extra money.

3. Define Your Priorities

If there are many variables you must consider when deciding to loan someone money or not, it may be helpful to break the situation down into smaller aspects. This can help you organize your thoughts to see the situation more clearly. states that, “The most popular reasons for asking family members or friends for a loan are to start a business or purchase a home. A national survey by Fundable said that 38% of startup businesses relied on money from family or friends. The National Association of Realtors said that 52% of first-time home buyers used money from family, mostly parents, or friends to buy a house.” [2] These may seem like reasonable purposes to ask for a loan. However, you will need to determine if the things that you would otherwise use the money for are more or less important than the purpose of the loan.

Another idea you may want to consider is making a pros and cons list. If the cons of loaning money outweigh the pros, then you will likely want to withhold your money.

4. Don’t Get Pressured

While your loved one likely doesn’t have bad intentions or want to pressure you into something you don’t want to do, they may be very focused on their goal and end up doing so anyway. They may simply want to improve their chances of getting what they want. It is important to remember that you don’t always have to give someone a loan just because they keep asking or pushing you to get it. You also don’t have to give them an answer right away. If you feel like you are being pressured into giving money, don’t be afraid to tell them that you need some time to think about it.

You also don’t have to offer an explanation as to why you won’t lend money. If you need the money for something you don’t want to tell them about, simply tell them no and say that you need the money for something else. You can even outright tell them that you don’t owe them an explanation.

5. Be Firm

Once you make your decision whether to give your loved one a loan or not, it is important to be firm with your decision. If you allow your loved one to guilt you or persuade into giving them the loan, they are more likely to use the same tactics again. On the other hand, if you are firm and stick to your position, they will likely realize that they should find another way to get the money. However, if you do want to give them a loan, be clear that if you don’t get paid back, that you will not loan them money again.

6. Offer to Help in Other Ways

Another option is to look for alternatives or a compromise. You can:
  • Offer part of the loan, but not the entire loan.
  • Ask them to do something in return.
  • Offer the loan as a gift for some special occasion.
  • Instead of giving them money, offer your time or assistance instead.
  • Help them find other tools or resources they can use to get the money they need.

7. Hear Them Out

Money matters can put a strain on any relationship. If you want to protect your relationship with the person asking for a loan, it is important for both parties involved to treat each other with respect. Even if you don’t give them the loan, you can hear them out. Let them fully explain why they want the loan. You can also ask them questions to get as much information as possible. When you have more information, you will be able to make a better decision or offer alternative solutions.

8. Manage Your Expectations

Lending money can be a gamble. If you do end up providing a loan, be sure to manage your expectations. The person may take a while to repay the loan or may not pay it back at all. This is why it is so important to make sure your expenses are met first. Many people tend to think of loans from family members as “gifts” rather than as serious loans like those from a bank.

“According to Bankrate’s latest survey of 2490 U.S. adults, 60% of Americans have helped out a friend or family member by lending cash with the expectation of being paid back, while 17% have lent their credit cards and 21% have co-signed for a financial product like a loan or rental. But more than a third (35%) who participated in at least one of these activities were negatively impacted, resulting in lost money, a damaged credit score or harmed relationship.” [3]

It may be helpful to go into the situation telling the recipient that if the money is not re-paid, that sum will come out of their future inheritance. Then if the loan is never paid back, it may not seem as damaging.

If you want to improve your chances of getting paid back, turn it into a legitimate loan. Write up a written, signed contract outlining the terms of the loan. Include the repayment schedule, interest rates (if any), and the consequences of not repaying the loan. This may feel awkward, but if the person truly wants the loan, they should be willing to meet reasonable demands and be transparent about the agreement.

Making the Right Decision

Loaning money to loved ones can be tricky business. Therefore, it is important to have a plan in place, and create a standard policy for lending. Doing so can help take the emotional pressure out of loaning and help you think more logically. While you truly want to help your loved ones when they need it, it is important not to sacrifice your financial well-being as you enter your golden years.

Alert1 offers a different type of security for seniors. Our personal emergency alarms provide you with 24/7/365 access to an emergency response agent who can guide you through a variety of emergencies such as a falls, accidents, medical issues, or fires. They will immediately secure whatever level of help you need and contact whoever you desire, whether it be a loved one or an emergency responder.

An in-home emergency button alarm is the most affordable option. A mobile communication device can accommodate more active seniors who like to get out of the house. You can also get both emergency medical alert buttons with fall detection. These devices include a built-in fall detection sensor that automatically contacts an emergency response agent when it registers a fall. This feature is useful if you are unable to press the button due to an injury or medical condition.

Whether you are making decisions regarding your financial or personal security, it’s advisable to make sure you’re covered not only for the present but prepared for what the future may bring as well.



[1] Senior Living staff. Aug. 2021. Research. Senior Living. 2021 Retirement Statistics.

[2] Fay, Bill. Oct. 2021. Loans. Loan Agreements With Family And Friends.

[3] Little, Kendall. Sept. 2019. Bank Rate. Survey: Lending Cash to Loved Ones Ends Badly for Nearly Half of Americans.