Why lending money to family and friends can leave you in the red

Money lent to friends and family is going missing permanently as Aussies forget to ask for it back or are too embarrassed. But those who don’t speak up could damage their relationships.

Money lent to friends and family is going missing permanently as Australians forget to ask for it back or are too embarrassed to speak up.

New research has found more than four out of five people are likely to forget to ask for loans to be repaid for purchases such as drinks, household items, transport and meals.

Key reasons include it being small amounts or believing the borrower will return the favour next time, according to the study by digital payment app Beem It.

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Olivia Wakefield and Thomas Warren discussing whether lending money is a good idea.

Olivia Wakefield, 22, says she has lent money to friends who didn’t have cash or forgot their wallet, and hasn’t asked for repayment when it was a small amount.

“Asking someone for the money back when it is only a few dollars feels like I’m being stingy and it just feels uncomfortable,” she said. Ms Wakefield now uses apps for splitting bills with friends.

While asking can be awkward, there are ways to approach it without offending.

Beem It chief executive officer Angela Clark said humans were wired to protect their relationships, and money could impact bonds between people.

“Either the amount is too small to worry about or they don’t want to seem money-hungry, so they are too embarrassed to chase,” she said.

“The problem comes when these amounts add up which can cause resentment to build that’s equally corrosive.”

Ms Clark said people wanting these loans repaid should be simple, straightforward and polite, avoid too much time passing before asking, and consider using digital technology that could help split bills.

Aussies are unlikely to ask for money back if they lend just a few dollars, research shows. Picture: Supplied

The research people found most people would let small amounts slide — such as $5 or $10, but fewer than one in 10 would forget to ask for $100 back.

Certified financial planner and author Patrick Canion said small loans could be a good test of a friendship.

“Maybe you want to see if the friend remembers the debt — if they do, then it shows they actually are a friend, if they don’t then you know that they don’t really care too much about you,” he said.

“If you remind them, you are precipitating a confrontation. And frankly, most people don’t like confrontation.”

Loans between family and friends could damage relationships, Mr Canion said.

“Although you might not remind your friend, you will never forget it. And then, a grudge can build into resentment. Then, not only have your lost money, you’ve lost a friend as well,” he said.

“Rule number one: If a friend asks for a loan, replace the word ‘loan’ with ‘gift’, and then ask yourself, would you give that amount of money to them?’’

IT’S MY SHOUT

Aussies are unlikely to ask for money back when the dollar value is:

$5 87%

$10 70%

$25 35%

$50 14%

$75 11%

$100 8%

Source: Beem It

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