Lending Money to My Daughter

Dear Dr. Michelle:

A few years back, I gave my daughter a significant amount of money because she had lost her job and was struggling to make ends meet. She’s been doing well for some time even though we are dealing with COVID. She has not made any attempt to pay me back and when I brought it up, she says she does not have the money. How should I navigate this situation so that my daughter pays me back?

Sincerely, Charlotte

Dear Charlotte:

I am sorry to hear about this situation with your daughter. It is nice to know you were in a position to assist your daughter when she needed it, and even better to learn that her situation has improved.

Lending money to family and friends can be risky and can affect relationships. There are three key situations when you should avoid loaning money or giving a gift of money:

1.  when your own security will be threatened by the loss of the money;
2. when you have expectations for being recognized in return; and
3. when the money is given with the expectation that it will be paid back, even when there is a legal contract drawn up.

While you cannot change the past, you can try to change your mindset. Money issues between family members can have long-term effects on relationships. Ultimately, you have no control over whether or not your daughter pays you back. But you do have control over your own reaction to the situation. You can try to find a way to be okay with the fact that she may never pay you back.

Be direct in your communication with your daughter. Explain to her your expectations and how you feel about the situation. Attempt to establish a new agreement about the money.

For instance, if upon giving her the money, you made it clear to her that she would need to pay you back, remind her of the agreement, but create new parameters around the payback. If no parameters were set, create them now. Try to give her control over setting the parameters. Ask her when she will be ready to start making contributions, for example. If you expected her to pay you back all in one lump sum, offer instead that she make small payments, even if it is only $10 a month, so she can demonstrate her commitment to new mutually agreed-upon terms.

If you did not make it clear when you gave your daughter the money that you expected her to pay you back, then it is important that you make your expectation clear now. Explain that you wrongly assumed she would pay the money back and share  your current expectations. Then work to create new terms, as outlined above.

By adjusting your own mindset – letting go of past expectations and resentment – you will be able to engage in a healthier conversation with your daughter. And you will also be better equipped to avoid disappointment if the conversation doesn’t go exactly as you hope it will. Good luck!