8 Ways to Help Family Members in Financial Trouble

During hard times—like losing a job, incurring expensive medical bills, or drowning in credit card debt—many people turn to their family for help.

You might find yourself consoling a family member who’s asking for help. Though it’s important to try to do what you can, it’s also all too easy to get sucked into a financial abyss alongside your loved one.

Let’s take a look at how you can help—without hurting yourself in the process.

Key Takeaways

• When a loved one is struggling financially, take a pause before giving them money. Consider whether they have a plan for avoiding the same pitfalls in the future.
• Make sure you have a clear agreement about the form of help, such as a loan or gift, and any terms for repayment.
• If you want to give the person something outright, consider giving them cash, paying one of their bills directly, or providing them with non-cash assistance.
• Consider giving them a job, if you can. You could also help them create a bill-paying plan, or help them access local resources like career counseling and training programs.
• If you want to help them with a loan, consider whether you want to make a personal loan or to co-sign a loan that they are seeking.

1. Give a Cash Gift

The most direct form of help is giving a gift in cash, outright.

Decide how much you can afford to give without putting yourself in financial jeopardy. Then either give the maximum amount all at once (and let your loved one know that’s the case) or give smaller gifts on a periodic basis until the situation is resolved.

Make sure it’s clearly understood that the money is a gift—that is, it doesn’t need to be repaid.

Important

If you’re considering giving a family member a substantial sum of money, you’ll need to keep an eye on the annual gift tax exclusion set each year by the Internal Revenue Service (IRS).

This limit—in tax year 2025, it’s $19,000 per person ($38,000 for married couples who file jointly)—is how much you can give without reporting it to the IRS.

You won’t need to pay taxes on your gift unless you exceed the lifetime exclusion amount, which is $13.99 million in 2025.

2. Make a Personal Loan

Your family member may approach you and ask for a short-term loan. Talk frankly, put the terms of the loan on paper, and have both parties sign. This will help ensure that everyone is clear on the financial arrangement they’re entering into. Some loan details you’ll want to include are:

• The amount of the loan
• Whether the loan will be a lump-sum payment, or if it will be divided and paid out in installments upon meeting certain conditions (e.g., securing another job or paying down existing debt)
• The interest rate you will charge for making the loan and how it will be calculated (compound or simple interest)
• Payment due dates (including the date of full repayment or final installment due)
• A recourse if the borrower doesn’t make loan payments on time or in full (e.g., increasing interest charges, ceasing any further loan payments, or taking legal action)

If you are going to lend more than $10,000 and/or you’re going to charge an interest rate that is substantially different than the going rate for most borrowers, you may want to talk to a tax professional. There can be unique tax implications for low-interest loans among family members.

Warning

When helping out a loved one in financial distress, there is a risk of getting sucked into a loop of loans and payments. To avoid this, make sure the terms and structure of the loan or gift are clearly defined in advance.

3. Co-Sign a Loan

Your loved one may be interested in obtaining a loan or line of credit (LOC), but what if they need a co-signer? Would you be willing to co-sign a loan or LOC from a bank, credit union, or online lender?

Potential Pitfalls

Before saying “yes” and putting your credit score in the hands of someone else, it’s important to realize there are legal and financial implications to co-signing on a loan. The most critical thing to understand is that you are legally obligating yourself to repay the loan if the other borrower fails to do so.

The lender can take legal action against you and require that you pay the full amount, even if you had an agreement between you and your family member that you would not have to make payments.

This delinquent loan will also now affect your personal credit. So if your family member fails to make payments on the loan on time and in full, the lender can report the negative account activity to the credit bureaus to file on your credit report which, in turn, can lower your credit score. 

Consider the Risks

Co-signing a loan is serious business. The fact that your family member needs a loan co-signer means the lender considers them too great of a risk for the bank to take alone. If the bank isn’t sure they’ll repay the loan, what guarantees do you have that they will?

It may also mean that you could have more difficulty getting a loan for yourself down the road since you are technically taking on this loan and its payment as well.

Before co-signing for a loan, make sure you:

• Ask for a copy of your family member’s credit report, credit score, and monthly budget so you’ll have an accurate picture of their finances and ability to repay the loan.
• Make sure that you understand all of the terms of the loan.
• Get copies of all documents related to the loan, including the repayment schedule.
• Ask the lender to notify you in writing if your family member misses a payment or makes a late payment. Finding out about potential repayment problems sooner rather than later can help you take quick action and protect your own credit score.

4. Create a Bill-Paying Plan

Often, someone who’s in a financial crisis simply aren’t aware where their money is going. If you have experience using a budget to manage your own money, you may be able to help your family member create and use a budget as well. Offer to show them your budget and your bill-paying system and explain how it helps you make financial decisions.

As you work together to help them get a handle on their financial situation, you may find places where they can cut back on expenses or try to increase their income to better meet their financial obligations.

5. Provide Employment

If you’re not comfortable making a loan or giving a cash gift, consider hiring your family member at an agreed-upon rate.

This job may go a long way toward helping them earn the money they need to pay their bills.

Treat the arrangement as you would with any other employee: spell out clearly the work that needs to be done, the deadlines, and the rate of pay. Be sure to include a provision about how you’ll deal with poor or incomplete work.

Note

If you don’t have cash to give a loved one, recognize that your time, patience, and ability to help them brainstorm and problem-solve are also valuable assets that you can provide.

6. Give Non-Cash Assistance

You might also consider giving non-cash financial assistance, such as gift cards or gift certificates. You’ll have more control over what your money may be used for, and you can easily buy gift cards in varying amounts at most stores.

7. Pay Bills

You may want to consider paying one or more regular bills that your loved one receives (rent/mortgage, utility bills, or insurance premiums) to help them during their current financial crunch. Offering to do something, such as making their auto payment, may help them avoid a short-term crisis and give them the extra time they need to work out their situation.

8. Help Find Local Resources

You may not be able to provide your family member with financial assistance or hands-on help. But you can still play a key role by helping them find local professionals who can steer them in the right direction, such as:

• A career counselor and employment agencies
• Welfare agencies and similar services
• Credit and debt counselors
• Lenders who can provide solutions

How Much Money Can I Give as a Gift Before I Need to Report It to the IRS?

For tax year 2025, you can give up to $19,000 per person ($38,000 if you’re married and file jointly) without reporting the gift to the IRS.

Can Budgeting Apps Help a Family Member?

Budgeting apps can help, as long as your family member understands the value of a budget and uses the app regularly. Two well-regarded budget apps you might consider are YNAB (You Need a Budget) and Simplifi by Quicken.

Is Lending Money to Family Members a Good Idea?

It may or may not be. Making a loan can show that you care about your loved ones. But getting your money back is another thing. And making, or co-signing for, a loan may result in negative effects, such as ill will and damage to your financial standing if it remains unpaid.

The Bottom Line

Family and money aren’t always a good mix. But in tough economic times, a loved one may truly need your help. Find out what they need to work their way out of their current situation, and be realistic about what you can provide. Carefully think through what you can and can’t afford to do. Remember, if your own resources are limited, there are other meaningful, effective, and creative ways to help your family members. It’s okay to take your time and start small.