Friends and Finances: Do They Mix?
21st August 2018
It's basic human nature to look out for the people you're closest to. Whether it's friends or family, we all need a little help once in a while, and the lucky among us always have someone to turn to. When it comes to prying open our wallets to help out a mate, though, it turns out some of us are biting off a little more than we can chew.
How much does the Bank of Mum and Dad lend per year?
It's hard to say no to a friend in need – and harder still when it's a family member. In the UK, for instance, the good old Bank of Mum and Dad is still well and truly open for business.
To put it in perspective, parents and grandparents will be leaned on in around 315,500 property purchases this year. It's not just the kids who are holding their hands out, either. Over a quarter of family borrowers are over 45. Another 8% are 55 and older.
All told, those casual loans stacked up to £6.5 billion lent to kids and grandkids in 2017 – and we haven't even started talking about friend loans yet.
How much do we owe our friends?
On average in the UK, we each owe about £2,800 to friends and family. That's over 10% of our average debt, ignoring mortgages. Honestly, a lot of us are starting to feel the strain of it, whether we're missing the cash we've handed out or struggling to pay back what we've borrowed.
By their very nature, “mates loans” tend to be casual, often interest-free deals with no strict terms. At any one time, an everyday Brit can expect to be owed over £400 by friends and relatives – and over half have lent out money we knew we'd never see again. For many, “no” is a tough word to find when someone close to us is asking.
How can I make sure I don't get into debt by helping out my friends?
No one's suggesting you have to turn your back when friends get into trouble. Unexpected bills hit all of us from time to time. You've got to ask yourself a few basic questions before forking over a hunk of cash, though:
- Can I afford to lose this if it all goes wrong?
- What do I know about my friend's financial situation?
- How good are they with money in general. Come to think of it, how good am I?
- Do I need to set any terms on the loan?
Most of the time that last point gets left out of the picture, and that can cause problems. If you really will need the cash back, you've got to lay down the law a bit about when you'll see it again. It's pretty easy for personal loans to mount up if people come to rely on them. Depending on the amount we're talking about, it might not be worth drawing up an official agreement in front of witnesses (although don't rule that out altogether).
Sometimes, a simple IOU note will seal the deal without making things too awkward. Some people actually go as far as asking for “collateral” on larger loans, holding onto something valuable until the money's repaid. In most cases that's probably overkill, of course. If you're that worried about getting your cash back, maybe you shouldn't be lending it out at all.
How many of us have ended friendships over money?
According to surveys, about 1 in 10 of us have lost a friend or damaged a family relationship over a loan. It's a genuine shame when that happens.
At RIFT, we understand the value of friendship – and we've even put a figure on it. The next time a mate or relative is a little short of cash, ask yourself if they might be owed a tax refund. Better still, ask us!
The RIFT Refer a Friend Scheme
The RIFT Refer a Friend scheme means you can help out a friend in need, and make some cash yourself at the same time. Here's how it works:
- You refer someone to us who might be owed some tax back (ask their permission first, of course).
- If they end up claiming a tax refund with RIFT, we'll send you £50 as thanks.
- For every 5 people you refer, you get a bonus of £150 on top. That's £400 for 5 referrals.
- Whenever you use Refer a Friend, you get entered into our prize draws. Prizes range from £150-£500 in cash right up to a Star Prize worth a whole lot more!
Refer a Friend is a real chance to help out a mate in need, plus the opportunity to earn a little extra for yourself. With RIFT, everyone benefits and we keep the taxman honest at the same time. Isn't that what friends are really for?
Claim a tax refund to beat your debts.
An HMRC tax refund beats an emergency loan every time. Instead of stacking up debts, you're reclaiming your own money when the taxman's taken too much - no strings attached. An average 1-year refund comes to over £750, and you can claim for up to 4 years back.
Check if you qualify for a tax rebate today.