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Susan Tompor: Ever give $500 to bail out a relative? You’re not alone

McClatchy-Tribune Information Services

March 14, 2016


Whether it’s a hand up or a handout, many families wouldn’t be able to pay the bills or live as well as they do now without extra cash from mom and dad, grandma or grandpa or a kindly aunt or uncle.

About 1 in 4 Americans received some money in the previous year to cover day-to-day expenses from someone who doesn’t live with them, according to data from the Pew Charitable Trusts’ Survey of American Family Finances and the Panel Study of Income Dynamics at the University of Michigan Institute for Social Research.

We’re not talking about slipping someone an extra $10 or $20 here or there, either.

We’re talking about giving someone $500 or more to cover a car repair, surgery for a beloved dog, a student loan payment or some other ginormous bill.

The median dollar amount of assistance was $1,000, according to Pew’s research, which was conducted in late 2014 with a total sample size of 7,845 people.

It’s a fascinating glimpse at how personal balance sheets get a boost from places other than paychecks and smart stock picks. We’re talking about an under-explored area of how a transfer of wealth among family and friends can add to financial security.

"When Americans run into financial difficulty, their friends and their family are there to help them," said Diana Elliott, research manager for the Pew study.

The survey, released earlier this month, showed that households that experienced a material financial hardship in the previous year were five times more likely than those that did not to receive money from family or friends. Maybe they missed a mortgage payment, skipped paying a bill, avoided going to the doctor, couldn’t afford to get a prescription filled or had a credit card declined.

None of this, of course, is any surprise to many grandmothers or aunts who have been running family bailout programs long before any of the big banks or automakers ran into financial trouble.

Gabriella Barthlow remembers the time her older sister moved to another state and needed money to repair her truck and get her necessary state certifications for her health care-related career.

"So I wrote her a check for $800," said Barthlow, a financial counselor.

She didn’t think twice about it.

"Why would I not take care of her?" Barthlow said.

After all, her big sister had bailed Barthlow out when she needed money after her divorce to cover her property taxes.

Both sisters paid each other back in full over time.

Barthlow said she even pulled out her checkbook to cover a $1,500 bill for her niece at one point when her car was impounded. But that didn’t turn out well.

The niece paid back most of the money but not all of it. Things got rather unpleasant when Barthlow said her niece gave her a little too much attitude instead of money.

Then, she said, "the Bank of Gabriella was officially closed to her. No cash withdrawals."

Barthlow said many families are happy to be able to help out their adult children or other friends and relatives. It can make them feel good to be able to use their resources to get someone else out of a bad jam.

But sometimes, relatives refuse to cut spending, trim back or eliminate expensive unhealthy habits or frankly, even go out and get a job.

Like, maybe, you give the niece with a sob story $500 for her rent and she shows up on Facebook bragging about a brand-new python-embossed Michael Kors shoulder bag.

At some point, you just need to slam on the brakes and say no.

Some families providing support to others can be coping with their own headaches involving money. About 75 percent of Hispanic households who gave help to others in their network reported feeling burdened, according to the study.

How do you know if you can afford to help out a friend or family member without putting yourself in danger of a financial hardship?

Barthlow said she spotted some helpful tips several years ago that she regularly shares with families. Go through this checklist first before giving any money to a loved one or friend:

—Is your own retirement account fully funded?

—Do you have enough money in an emergency savings fund to cover your own bills for anywhere from three months to one year?

—Are all of your credit card bills paid in full each month?

—If you give or lend someone that money, can you completely let go of it without any strings?

As much as someone promises to pay you back, they might not always do so, she warned. She said the issue with her niece was very painful, not because of the money but because of the harsh words.

"It changed the dynamic of our relationship," Barthlow said, even though the girl’s mother ultimately paid the rest of the debt for her daughter.

Some young families raising children need that extra safety net provided by family or close friends. One in five households making less than $40,000 a year received money from friends and family in the past year — and two-thirds of those people got financial help more than one time. The amount of help for that income group often was around $500.

But it doesn’t necessarily mean you don’t have two pennies to rub together, if you’re getting extra cash.

Among adults who received help for higher education or a home purchase, most were raised in the wealthiest households. The next generation can benefit in many cases from the wealth that a family has built up. The amount that households making $85,000 a year or more received was typically $1,000.

Unfortunately for some seniors, many in the family only know too well who to hit up for cash.

The so-called silent generation — retirees born in the mid-1920s to the early-1940s — were the most likely to give or lend money in the past 12 months with 31 percent in that group giving something. The median amount given or lent was $2,000.

The baby boomers were next on the list with 30 percent helping out financially. The median amount given or lent was $1,000.

Younger family members benefited from the generosity the most. Millennials received the most money with 19 percent reporting receiving money in the past 12 months.

No doubt, it’s comforting to know that we can bank on our families and friends when we really need a little extra cash. But we all should realize, we really shouldn’t play that Friends & Family ATM card too often.