Coronavirus: Americans reach into their own pockets to financially help family and friends
Americans are reaching into their own pockets to help their families and friends in the age of COVID-19.
In spite of the financial devastation caused by the coronavirus, new survey data from Medical Alert Buyers Guide made exclusive to Cashay reveals that Americans are making financial sacrifices to carry friends and family through this time of financial hardship.
More than a third of Americans — 36.5% — are currently supporting friends or family financially, the survey found of 1,013 people in the U.S. Four in 10 survey respondents said they received some financial assistance from their loved ones since the pandemic’s arrival.
The money help is cross-generational. Half of boomers are helping out their adult children, while 3 in 10 Gen Xers are supporting their older parents. A third of millennials are assisting their baby boomer parents, while another 1 in 3 are lending money to friends in need, the survey found.
“The reality is most Americans are not prepared for a big financial change in a negative way,” said Chantel Bonneau, a certified financial planner with Northwestern Mutual. “Before the COVID-19 outbreak, about one out of every three Americans said that they were within three missed paychecks of having to borrow money or skip paying bills.”
Record-breaking unemployment has led to Americans reaching out for government aid for essentials like food, child care, and unemployment benefits.
“If people can get through this, [it’s time] to start to revisit their financial life from a place of fundamentals,” Bonneau said.
This is a time to establish an emergency fund, gain clarity on your cash flow, and never assume that your job is recession-proof or impervious to layoffs, she said.
These generous loved ones expect the lending to continue for the next few months, with more than three-quarters reporting they believe they will need to financially support family or friends at least through the summer, according to the data.
Baby boomers are giving $1,441 on average. Gen X is averaging $1,611 in aid to loved ones, while millennials are offering $1,347 on average, the data showed. The money help is going to groceries (60.4%), rent (39.4%), utilities (28.5%), and medical bills (21.9%), according to the survey.
When helping each other, Bonneau advised that a one-time cash injection for an expense like groceries is helpful, but might not make the greatest impact. For instance, if a family member has a deferred student loan or a zero-interest car loan they won’t be penalized for not paying right now, that money can be diverted to a bill or creditor who is less forgiving and lenient.
It’s also smart to look at the entire family’s financial picture to see if the money issues are due to the pandemic and are likely to self-correct, or if they’re symptomatic of a larger money management problem that will take more involvement, Bonneau said.
Tips for lending
Mixing money with friendship or family doesn’t have to sour the relationship as long as expectations are clear from the beginning. “The thing that's always important when you are lending money is to be very clear that there's a chance you're never going to get it back,” Bonneau said.
Either as the lender or lendee, it’s important to set terms of the loan, put everything in writing, and not leave anything left unsaid. The key is to understand whether your relationship will be tarnished if your loved one never pays you back. If yes, then don’t lend to that person.
“Money is not worth ruining your relationship with your family or your best friend,” she said.
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. She can be reached at firstname.lastname@example.org. Follow her on Twitter @SJAsymkos.
Read more information and tips in our Spending section