The Pros and Cons of Relying Upon a Friend or Family Member for Financial Advice
Discussing money with friends and family can be intimidating, but finding a financial mentor from within your circle can be powerful.
March 7, 2022
If you’re fortunate enough to be surrounded by supportive friends and family, you likely turn to them for advice at times. But what if you need advice about money?
Money can be awkward to discuss, and our society tends to discourage discussion. But, like it or not, money is a huge part of our lives. Finding a financial mentor, or just someone you trust to talk things through with, can be very valuable.
But it’s important to approach the conversation in the right way — and to pick the right person to talk to. Here’s everything you need to know about getting financial advice from friends and family.
Pros and cons of getting financial advice from friends and family
There are significant advantages and disadvantages to consider here. Each depends on your relationship with the person — but in general, here’s what to keep in mind.
Benefits
It’s free. Seeking advice from a professional financial advisor will cost you money upfront, and may also involve ongoing fees depending on the advisor.
It’s personal. These people know you. They know your personality, your strengths, your weaknesses. While this means you’ll need to be vulnerable, it also means that your new money mentor may be able to give you more personalized advice.
It can go both ways. Many people avoid talking about money, but if you’re open with someone, they’re more likely to open up to you. Having a real talk about money can be beneficial to both parties.
Drawbacks
It can get awkward. If the conversation isn’t handled properly, things can get awkward and potentially damage your relationship. There’s a reason that an estimated 57% of Americans intentionally avoid talking about finances with their friends.
It’s (probably) not professional advice. Unless your friend or family member is an actual financial expert, the advice you receive won’t be true professional advice. In many cases, consulting a financial advisor could be more beneficial.
It can change your relationship (for better or worse). Discussing money can alter your relationship with this person in any number of ways. If they find out that you make a lot of money, for instance, they may ask you for a loan next time they’re in financial trouble. Or if they find out that you are in a lot of debt, they may think differently about you. It’s impossible to know ahead of time how this will play out, but it’s something important to keep in mind.
How to find a financial mentor in your circle
Chances are, you know some people who are good with money, and some who … aren’t. Obviously, it’s important to seek advice from people who have their own finances on track. But it goes beyond just that.
A good money mentor should:
Be a trusted friend or family member
Be open to sharing
Be respectful and understanding
Have the necessary financial knowledge to give good advice
Before you look for a money mentor in your circle, think about how discussing money with them could potentially affect your relationship. And consider the pros and cons discussed above.
How to start the conversation
Once you’ve decided who you want to seek advice from, it’s important to start the conversation in the right way.
There are a few ways to go about this, and ultimately it depends on your relationship with the person. But usually, the best approach is to keep it clear and honest: Simply ask them if they are comfortable talking about money with you.
By asking this question before diving into any specifics, you can set the stage for a better discussion. And if the person answers “No, I’d rather not,” then you know right away to just move on to another topic.
Here are some other general tips to keep in mind when talking about money with friends or family:
Avoid comparison (don’t compare your salary to your friend’s, for instance)
Avoid judgment
Be honest
Be clear about what advice you are looking for
Reciprocate. If the other person wants to discuss their financial situation with you, listen respectfully and offer advice if they ask.
Also, make it clear if this is a one-time conversation, or if you’d like this person to be somewhat of a financial mentor going forward.
Consider a professional
Finding a financial mentor in a friend or bouncing financial ideas off a family member can work well. But if you need specific, actionable advice it’s often worthwhile to consult a professional.
You can find a financial advisor in your area to help. Ideally, look for a fiduciary financial advisor, because fiduciaries are required to act in your best interest.
Financial advisors can help you draft a financial plan, optimize your spending and saving strategies and even manage your investments for you.
These experts will charge a fee, of course, but if you want professional advice, it’s typically worth the cost to consult an advisor.
Consider anonymous online forums
Another alternative is to use some sort of online forum, message board, or Q&A website. These are free and can be fully anonymous. Here are just a few examples of sites you can use:
If you go this route, it’s important to be anonymous. Don’t include any personal information, like your name, location, or tax info. And if you already have an account on one of these websites, it’s wise to create a new account specifically to discuss money so that people can’t find out your real identity through the other posts you’ve made on that platform.
These forums can be a great place to ask questions and seek advice anonymously but you’ll be getting advice from people who likely don’t have formal finance training — so take any advice with a grain of salt.
Learn more about finance online
If you’d rather learn on your own time, there are great resources online to help you. Check out these resources from Tally:
The most common financial problems (and how to avoid them)
Prefer books? Check out our best financial literacy books roundup.
And if paying off debt is on your financial to-do list, take a look at Tally†. Tally is a powerful finance app that may help qualifying Americans pay off their credit card debt faster. Learn how Tally works here.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.