The pandemic has caused financial hardship for millions of Americans, forcing many to turn to family and friends for help. As of September 2020, over 40 percent of U.S. adults were providing financial support to family members and friends during the pandemic, even when it’s put a strain on their own finances. Many families rely on informal lending and borrowing arrangements to weather the storm, especially in acute financial emergencies or when there is a lack of available assistance from lending institutions.
Financial educators are particularly aware of the prevalence of these types of financial arrangements – otherwise known as family financial exchanges (FFEs). To support practitioners helping clients through these often sensitive conversations about these arrangements, the Bureau released the , a four-part guide for coaching clients in asking for financial help or changing an existing agreement due to their own financial hardship.
Practitioner tools for creating and changing financial arrangements
- Weighing the pros and cons of a financial arrangement, including the potential impacts on their financial situation and relationship
- Practicing conversations to request or change financial arrangements
- Clarifying expectations for a mutual agreement
- Establishing action steps to encourage follow-through
The toolkit accounts for different cultural backgrounds and expectations around sharing financial resources, as well as varying comfort levels around discussing money. It’s also meant to empower clients to make informed decisions in determining what’s best for their situation.
While the Bureau doesn’t necessarily encourage or discourage these financial agreements, we recognize that they’re increasingly common, especially as a result of the pandemic, and can put a strain on important and often vital relationships. As a result, we’ve released our toolkit for financial educators as well as a navigate these difficult conversations.