Handling Family Requests for Cash During a Tough Year

(Bloomberg Opinion) -- The holidays are all about expectations. People expect gifts. People expect elaborate meals and gatherings. And many people expect relatives to ask for financial assistance.

This year, this third expectation may fall particularly hard on professionals of color. If you are viewed as the success story in your family, there are often strong cultural assumptions about your ability — and perhaps obligation — to give to friends and relatives.

In the past, I have been asked to help pay for funerals when a relative had no life insurance, cover a mortgage payment when a relative was unemployed and otherwise financially assist loved ones because I was seen as the one who “made it.”

Add to that the harsh reality that communities of color have been disproportionately crippled financially by the Covid-19 pandemic and the pressure to assist others may feel twice as heavy this year. This pandemic has only exacerbated wage and labor market inequities and Black and Latinx communities have borne the brunt of the impact.

Currently, Black Americans have the highest unemployment rate. Recent data shows 12% of Black Americans are jobless; that is down from a high of nearly 17% in May, but up from the pre-pandemic rate of 5.8% in February and from the all-time low of 5.5% in September 2019. It’s a tough time.

“If you are that 'one in a hundred’ child who made it plus one of the fortunate few to be relatively financially unscathed in this pandemic, then you may shoulder a lot of pressure to assist others,” says Shawn Rochester, CEO of Good Steward LLC, a financial education and advisor company and author of “The Black Tax, The Cost of Being Black in America.”

While you should not feel (or be made to feel) any guilt, helping family members is an unspoken part of the social contract in our families. It can be done if you’re strategic and make sure you’re not damaging yourself financially.

Rule number one: Keep your own finances secure. “Don’t give until it hurts. That serves no one,” says Lynnette Khalfani-Cox, author of 15 personal finance books, including the New York Times bestseller “Zero Debt: The Ultimate Guide to Financial Freedom.”

Instead, think of your loved ones’ needs as part of your budget, as you do with other line items. “Determine how much cash on hand or on-going cash flow you can set aside to help … and use that money to assist your family. But don’t exceed that amount,” says Rochester.

And consider this special caveat for Black women: The number of African American women in the U.S. workforce has declined by 6% since February — twice the rate of White women. “So even Black women with fairly ‘stable’ jobs or higher-earning careers need to be mindful of the larger economic trends that could impact them during this Covid-19 outbreak. Bottom line: You may be relatively secure today, but almost everyone's income and cash flow can be impacted in uncertain times like these,” says Khalfani-Cox.

“My rule of thumb for offering assistance is asking myself, “Will my assistance actually make a difference?” If, after lending a family member money, I know that next month they will still be in the same predicament, then I’m not really helping, just temporarily delaying the inevitable. If I know that my gift will shift an outcome in a sustainable way, I’m more likely to help. Because I see my assistance as a vehicle for change,” says Tiffany Aliche, a financial educator and founder of The Budgetnista.

If you do choose to give, or to provide a loan, be explicit about your expectations for repayment. For example, if you can afford to make it an outright gift, and you're inclined to do so, simply tell your relative: “I'm giving this to you because I care about your well-being and I don't want or expect you to repay this money. It's a gift.” 

On the other hand, if you do need or want to be repaid, be explicit about that as well. “Say something like: ‘I'm loaning you this money because I care about you and I know that you're in need. But I don't want finances to ever come between us, so I'd like to put this loan agreement in writing so that we're both on the same page.’ And then put the terms down on paper: Loan amount, date of repayment or a schedule of payments, interest (if any) and so on. You should both sign it too,” says Khalfani-Cox.

When it comes to loved ones, I consider all loans as gifts. If I really need the money back, it’s better I not part with it in the first place. It took me a long time to learn how to establish financial boundaries with relatives, and I try to stick to them. But 2020 has been … well, 2020.

My favorite Granny always said, “To whom more has been given, more is expected.” I believe that. I also want the systemic problems that contribute to our families and communities being under-resourced, underemployed and lacking access to capital to be addressed. These longstanding inequities will require a much more aggressive and comprehensive approach from both the federal government and private employers. We need to overhaul labor laws and close the racial wage gap, not just bring Black unemployment back to pre-pandemic levels.

Until then, those who have broken through will do our part, lifting as we climb. Rochester, for example, sees helping others as part of his good financial stewardship framework and a core principle of creating legacy.

“Helping loved ones is one of the ways a community can expedite financial growth within a family,” Aliche agrees. “And I do believe that giving activates abundance.” Just what 2021 needs.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Kimberly Seals Allers is a journalist who has covered business and investing at Fortune, the New York Post and Essence. She is the author of five books, including “The Mocha Manual to Turning Your Passion Into Profit” and, most recently, “The Big Letdown.”

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