Whether it’s your first NIL check, a sponsorship deal, or your very first paycheck, it’s natural to want to share the wealth with the people you care about—family, partners, and friends. The excitement of earning money, especially for the first time, can spark a desire to give back to those who have supported you. But here’s something to think about: are you giving away your money at the expense of building your own wealth? I recently came across an article about Warren Buffett’s decision to stop giving his family holiday cash gifts of $10,000 after realizing they were spending the money recklessly. Instead, he started gifting them with assets, like stock, allowing them to create their own path to financial stability. It’s a lesson we can all learn from, whether we’re current or former athletes, entrepreneurs, or professionals just starting out.
If you find yourself being approached by family members, close friends, or even a partner asking for financial help, it’s important to step back and evaluate how, or even if, you can support them. Here are six steps to help you make thoughtful decisions about helping loved ones financially.
How to Help Friends and Family Financially
1. Set a Budget for Giving. Before saying yes to any financial request, establish a clear budget for how much you’re willing to give. Assume that any money you lend may not be repaid—even if it’s promised as a loan or an “investment” in a business. Decide on a percentage of your earnings that you’re comfortable allocating for helping others, and stick to it. This approach ensures that your generosity doesn’t jeopardize your financial stability.
Example: If you earn $5,000 monthly and decide to allocate 5% of your income for giving, you’ll have $250 per month to offer support. This keeps your contributions predictable and within your means.
2. Understand the Purpose of the Gift. Evaluate why the money is needed. Is it for essential needs like groceries, rent, or medical expenses? Or is it for something less urgent, like a vacation, clothes or other luxury items? Prioritize assistance that supports basic needs and long-term stability.
For more sustainable giving, consider following Buffett’s example: gift assets like stocks or savings bonds. These can grow in value over time and encourage recipients to think about their own financial future rather than relying solely on you.
3. Communicate Boundaries. Be upfront about your financial situation and what you can realistically provide. It’s okay to say no. Clear communication can help set expectations and avoid misunderstandings. Let your loved ones know that your goal is to help in a way that’s sustainable for both you and them. Tip: Use phrases like, “I’d love to help, but here’s what I can manage,” to keep the conversation positive but firm.
4. Prioritize Yourself First. Before helping others, make sure your own financial foundation is secure. Are you saving for retirement? The head of your household? Investing in your education or professional growth? Building an emergency fund? These should all come before giving away your hard-earned money. Remember, you’re in the best position to help others when your own financial health is strong.
5. Offer Alternative Support. Financial help isn’t the only way to support someone. Offer alternatives like helping them find scholarships, job opportunities, or financial resources. Share your own knowledge about budgeting, investing, or building credit. This type of support can be just as impactful as monetary aid—and often more empowering.
For example: If a sibling needs help paying for school, assist them with researching scholarships or filling out financial aid applications instead of writing a check.
6. Seek Professional Advice. When in doubt, consult a financial advisor. They can help you determine how to integrate your generosity into your overall financial plan without compromising your goals. Advisors can also suggest creative solutions, like setting up a trust or creating a charitable fund, to manage your giving.
Helping family and friends can be one of the most rewarding ways to use your financial success. But it’s important to ensure that your generosity doesn’t come at the expense of your own financial security. By setting boundaries, prioritizing yourself, and planning thoughtfully, you can support your loved ones while continuing to build your own wealth. After all, the better you manage your money, the more you’ll be able to give in the long run.