Emergency Fund for Friends

[TickTock]

I read this article: MSN

Summary: The author started a "Friends Emergency Fund" during Covid, when she couldn't be there in person to offer support; she lived around the poverty line for a few years, and now that she's financially secure she continues the fund.

It got me thinking about an idea I've kicked around for several years - an account to be used for friends who are in temporary trouble, with the understanding (no legal stuff involved) that they will pay it back if and when able. We did something like this years back; a friend was in college, getting a degree which would support a career and one part of the government failed to send him a form that he needed to prove to another part of the government that he did in fact qualify for financial aid. So he couldn't pay tuition and the needed course wasn't offered again for a year. We covered the cost of what the government failed on, with the understanding that he would pay it back (no interest) with earnings from the job that he would have one year sooner than if he didn't take the course immediately. Spoiler: It worked as planned.

Anyone do either of these approaches? Hers is more gifting; my idea is gifting with the idea that the money would be repaid if and when possible, and if the account went to zero then that's the end of it (until and unless money came back at a later time).

 

[disneysteve]

There's no quicker way to destroy a friendship than to put that person in debt to you. If you want to give them a gift, maybe, but not a loan. As soon as you do that, you totally and permanently alter the relationship. It becomes super easy for you to see them post on Facebook that they went to a concert and think, "Gee, if they can afford that concert, how come they haven't paid me back anything yet?" And on their end, they may find themselves intentionally avoiding you when they haven't paid you anything yet even though they have some money now.

Even gifting them money can be problematic but lending them money definitely can be.

 

[freedomatlast]

I have helped others out on occasion but I don't have a separate fund just for that.

 

[GrayHare]

Rather than simply give money, I've funded small projects, such as ones by friends of the starving artist variety..

 

[jollystomper]

We do not have a "designated" fund per say. We try to use wisdom and discretion to determine when to help friends and family, and how much to help. We also, if the situation is looking for a loan, never give more than what would bother us if the amount was never paid back.

 

[Teacher Terry]

I tend to help friends with time more than money. For example I watched a friend’s 3 year old every morning for 3 years until the head start bus came so she could get her degree and get off of welfare. If I couldn’t do it for some reason my mom did.

I’ve done tons of things like this throughout the years. A few times I have given friends a small amount of money if they were in a bind.

 

[imjustawarrior]

We have helped many people and still do. We do not have a dedicated fund. We do not make it a loan. It is a gift. If they pay it back, that is fine. If they don't, all the better. Even if someone asks for a loan, I consider it a gift. There are no strings attached with a gift.

We view it as part of our charitable giving. It just doesn't have a tax break. That is okay. We don't give for the tax break. We believe in loving our neighbors.

All actions affect something. Helping people with money I am sure affects the relationship in some manner. We have not had problems that I am aware of.

 

[Gallaher]

If you are “giving” or “loaning” I think a lot more people want to be “friends”.
Just kind of human nature.

 

[Sanstar]

About 40 years ago, a relative called for a $100 loan to buy a bus ticket to relocate to a job opportunity. DH and I didn’t have anything to spare in our budget, two little kids and a third on the way. We sent him the money as a loan and that was the last time I heard from him until DM’s funeral 20 years later. I didn’t bring it up then and neither did he but I did learn a lesson.

More recently a nephew called asking for a $10k loan to divorce his drug addicted wife and mother of my 3 yo godson/great nephew. I told him I am not in the money lending business and would gift him the money. He assured me he’d pay me back and now, 5 years later we never discuss and I have no illusions I’ll see it.

On the other hand, our young kids were taking karate lessons when the owner of the dojo confided his worries to DH about needing $5k to keep the dojo going. DH didn’t discuss with me before giving him the money. I had major heartburn with this but bit my tongue and let it go. It turned out really good for us in the long run. The business owner was a tremendously positive influence on our 2 adolescent boys; he never charged us for lessons after giving him the money. It quickly became apparent DH did right by him and our family and I’m so glad I kept my initial thoughts to myself.

Our current guideline is to gift $ for reasonable reasons to family if it won’t affect us and don’t expect it back no matter what the recipient says.

The idea of having a pool of funds set aside specifically for others faced with a financial emergency is interesting. I’d be especially interested in learning what percentage of loans are repaid. I’m 0/4 so far (not counting the dojo which was a gift).

 

[rk911]

We've loaned $ to my sister who paid us back but that was before we had reached 'critical mass' and she was employed.

We gifted $ to a good friend (I was his best man) who was down on his luck to help with family expenses. Straight up gift. Many years later his kids were grown, he divorced, found his high school sweetheart and married her. He developed heart trouble, had open heart surhery, couldn't work and died penniless shortly thereafter. His wife couldn't afford even a basic funeral and we didn't want the county to take care of so we took care of it.

We've sent $ to one of my wife's friends as a gift to help with expenses (her husband is old-er and has heart issues). Again, straight up gift. At Christmas we gift my nephew and his wife, my sister and her husband and make an annual contribution to their son's 529 plan.

 

[badatmath]

I'm the "poor" one so no one asks me for anything. . . Well except for strangers. Only 1 last week told me he needed help to feed his family. . . I was in the parking lot of grocery store.

 

[Koolau]

Never loan money to friends. It ruins their memories.

I have gifted to people, but have always been disappointed when loaning money. YMMV

 

[rembrandt]

This is what GoFundMe is for.

 

[athena53]

If you are “giving” or “loaning” I think a lot more people want to be “friends”.
Just kind of human nature.

I'd be concerned about that- certainly there are people living paycheck to paycheck because they don't make much and then Stuff Happens- but I'd be concerned about being a perpetual Emergency Fund for some. I've been fortunate- loaned money to people in DH's family twice (stepson's wife abruptly filed for divorce leaving him with no vehicle, BIL and SIL needed to buy a car and had bad credit) but they were amounts we could afford to lose and we were paid back.

My "checking account register" is in Excel and includes sub-accounts for various purposes (property taxes, insurance, state and federal taxes, home maintenance, etc.) and one is charity. I add regular amounts to it every month and then when an opportunity to help comes up I take it from there. Most of the time it's 501(c)(3) organizations but sometimes it's a GoFundMe.

I did not contribute to the GoFund me for a friend whose doggie chewed up a yarn rug and needed $6,000 for surgery to get it all out of Doggie's innards. (She did raise the $$ and the surgery was successful.) I'm not a pet person.

 

[imjustawarrior]

This is what GoFundMe is for.

This may be fine for some, but I would not use it. I don't like the idea of the business model around it. If I am going to give money to someone, I want that person to get 100% of the money.

The GoFundMe culture rubs me the wrong way. Maybe it is a good thing in some cases, but it comes across to me that there is a GoFundMe for every little thing that happens.

 

[jollystomper]

...
The idea of having a pool of funds set aside specifically for others faced with a financial emergency is interesting. I’d be especially interested in learning what percentage of loans are repaid. I’m 0/4 so far (not counting the dojo which was a gift).

My experience, and off-the-top-of-my-head guess, is that one is lucky to get as much as10-20% of these loans repaid. It may be analogous to investing venture capital... I have estimates that 75-90% of venture investments fail.

But for me, those who did repay us have shown a level of appreciation that lasts well beyond paying us back. That has been a nice, sometimes embarrassing to a degree, surprise .

 

[38Chevy454]

I don't loan money. I think most Go Fund Me are people trying to have others bail them out of their own mess. Some are legitimate, but I just don't do any Go Fund Me.

I have given small direct gift donations to people, less than $100 each time.

 

[mystang52]

None of my friends are on shaky financial ground, so I would never get such a request. But if I did, I would remember Judge Judy's sage advice: never lend money to a friend. The friend inevitably resents you if you ask for it back (regardless of original loan agreement) and you are then an enemy, and you lose a friend. Better to just gift the money, if one is so inclined.
Regarding Go Fund Me, I gave one time years ago (anonymously), for the benefit of a town citizen in genuine medical/financial need. I see so many Go Fund Me requests that I think are simply over the top and unnecessary.

 

[pacergal]

I have given monetary gifts, never any loans.
However, I have never been directly asked for money either. It's usually been a fundraiser or Go Fund Me type of thing sent out to groups.

 

[athena53]

I don't loan money. I think most Go Fund Me are people trying to have others bail them out of their own mess.

I know- a former HS classmate started one for another classmate who was having hip replacement surgery. He was a nightclub entertainer, no health insurance. Would be losing income as well, of course. It just rubbed me the wrong way that he had to have seen this surgery coming and ACA was available. Why no insurance?

Some of them are for "wants", too. I try not to be too judgmental but I'm also aware of the need to make sure my donations (tax-deductible or otherwise) go to where there's the most need and where they'll do the most good.

 

[Koolau]

I'd be concerned about that- certainly there are people living paycheck to paycheck because they don't make much and then Stuff Happens- but I'd be concerned about being a perpetual Emergency Fund for some. I've been fortunate- loaned money to people in DH's family twice (stepson's wife abruptly filed for divorce leaving him with no vehicle, BIL and SIL needed to buy a car and had bad credit) but they were amounts we could afford to lose and we were paid back.

My "checking account register" is in Excel and includes sub-accounts for various purposes (property taxes, insurance, state and federal taxes, home maintenance, etc.) and one is charity. I add regular amounts to it every month and then when an opportunity to help comes up I take it from there. Most of the time it's 501(c)(3) organizations but sometimes it's a GoFundMe.

I did not contribute to the GoFund me for a friend whose doggie chewed up a yarn rug and needed $6,000 for surgery to get it all out of Doggie's innards. (She did raise the $$ and the surgery was successful.) I'm not a pet person.

My sister's Irish ate a pair of pantyhose. I called him the Six Million Dollar Setter after that.

 

[RetiredHappy]

For my first home purchase for the down payment when I was about 28 yo, I asked my sister to lend me $50K and she said yes immediately. I repaid her as soon as I could, which was a year later. The condo cost about $700K back then and the down payment was around $200K. No matter how mean she is to me in many ways, I never get upset with her because I know that she cares for me deep down inside her.