Tender, Loving Credit

First, don’t loan. Give. Invariably financial professionals will tell you to think of money shared as a gift, something you don’t plan to get back, just as you don’t expect your ten-year-old to reimburse you for summer camp fees when he’s grown. “I did this myself,” says Garrett,who was named one of the 25 most influential people in the field by Investment Advisor magazine and is a frequent speaker on personal finance. “One of my very best friends in life was in a bind, and I could see there was no way she was going to be able to repay me in the foreseeable future. She said she wanted the money as a loan, but I said, no, it had to be a gift.” Garrett understood that more than bitterness could get in the way. “I knew if my friend couldn’t follow through on a loan, she’d be embarrassed and stay away from me.”

Second, make sure you can truly afford it. “If you have to borrow to give,” says Garrett plainly, “don’t.”

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Third, inform your spouse from the get-go, and if you’re giving money to a child, find a way to treat his or her siblings equally. Resentment springs forth gladly from all sorts of sources: Who knew that Suzie, with her nice house and high-powered job, would feel injured when Dad helped her brother?

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Fourth, if you can’t make the handout a gift and insist on seeing it as a loan, put the thing in writing. All the professional guides will tell you that this is the most important tenet of lending to friends and family. As Blair E. says emphatically, four years after he stuck his neck out for his farmer friend, “Just document it.” No matter how crass or untrusting it might seem, the experts want you to formalize an agreement. “You can lie and say, ‘I need it for tax purposes,’” says Blair, wishing he’d done so. “You’re not asking too much to ask for a piece of paper.”