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But, you take a deep breath and gently ask why by inquiring: “is everything OK?”

Until this point, you and your friend have only been friends. You play sports, have picnics with your families and sip wine on park benches. You’ve never really talked about business or money or things like that.

They explain that between being out of work and starting their new job in a few weeks, they’ve simply run out of cash.

In your head, you’re having an awkward ‘omg’ reaction wondering how things got to this point.

But, honestly, you’ve been following the Reddit threads and headlines on how much strain is on 20 and 30-somethings right now, without much savings or work, and high debt levels.

Last month 1.4 million Canadians missed credit payments, according to Equifax.

Though this is down from the previous quarter, the financial gap is widening, and young people and renters are being hit the hardest.”

Honestly, if you didn’t have such a stable job yourself, you could easily be in the same boat.

“OK, I understand and this must be awful to even have to ask,” you tell your pal. “Can you give me a day to think it over? And, take $50 right now to get some groceries for your family tonight. I don’t want this back.” You hand them a $50 bill as a gift while you deliberate.

Whether you are a friend or family member of someone financially stressed, you might want to think this through before sending them an e-transfer, or flat out rejecting them altogether.

Three reasons they’re asking and how to think it through

First, they know you might actually be able to help.

At least, that’s how they view you and your finances. Think about if you can actually afford to do this, and if you even want to.

Do you have enough savings or would this mean using your line of credit?

Don’t forget about your spouse’s sensitivity to the lending circumstances, too.

Any kind of money exchange affects the finances of your entire household and has implications on the personal interactions with the friend who is borrowing your money and their partner.

If you’re going to move ahead, get your spouse on-board with the idea first and take their wishes into account.

Second, they’re in a legitimate pinch and are out of money and will at this point do anything.

Perhaps they’ve been laid off of work or had an emergency. Maybe their rent has gone up and food costs have soared beyond a manageable point.

It could also be worse like getting divorced and trying to sell a home in an upside down real estate market. The money they need could be to cover essentials.

You’ll want to assess if this is actually a loan that will get paid back, or more like a gift.

My advice, having been in this situation before, never loan money privately that you can’t afford to lose or give away.

If it is a true loan, draft an agreement (Chat GPT or Gemini can help), complete with a schedule of repayments. This will hopefully keep the funds flowing back to you, and your friendship on track.

If there’s trouble repaying the sum, you can explore other options such as extending the payback period or exchanging something of value in return, say services of some kind or sports gear.

An old neighbour of mine, lent $10,000 to his friend who owned a hot tub store. Three years later, he still hadn’t been repaid, so they worked out a deal — a free hot tub instead of cash.

Third, they’re blowing through cash and always seem to be broke.

This is almost always a losing scenario for everyone. Try not to be judgy, but if they simply don’t know how to manage money, maybe its time for a hard lesson in budgeting, particularly if they earn decent bucks. Clearly their spending habits are out of control.

Point them in the direction of a budget template. If things are really bad, and they simply can’t keep up with credit payments on things like credit cards or lines of credit, suggest they speak to a credit counsellor or licensed insolvency trustee.

You know your friends well, use your judgment.

Lending money or just giving it to them, could change their life and give them a huge lift especially during this tough economic time we’re in.

But, it can also complicate friendships and finances.

If you do go ahead with the loan, communicate clearly and use caution.