Estate Planning Made Simple and How to Handle Family Loans

Today's episode is sponsored by Quince.

It's officially fall, aka the magical time when you realize your wardrobe is 90% t-shirts and one sad cardigan.

And suddenly you're googling how to dress like an adult, but still feel like you're in your pajamas.

Enter Quince.

They've got everything I need to feel put together and most importantly, cozy.

I'm talking 100% Mongolian cashmere starting at only 50 bucks.

Washable silk tops and tailored denim that doesn't cost a small fortune.

I've been eyeing their wool coats.

They look super cozy and really sharp.

They look like designer pieces, but without the designer markup, and the quality is just as good, if not better.

Well, Sean, I think that's because Quince works directly with ethical top-tier factories and cuts out the middlemen.

So you get luxury without the label price.

I've already got their leather passport holder in rotation, and now I'm ready for some layering staples that don't feel like a budget compromise.

Same, same, same.

Their cashmere sweater is already in my weekly lineup, and I'm eyeing those silk shirts next.

Keep it classic and cozy this fall with long-lasting staples from Quince.

Go to quince.com slash smartmoney for free shipping on your first order and 365 day returns.

That's q-u-i-n-ce-e.com slash smartmoney to get free shipping and 365-day returns.

Quince.com slash smartmoney.

Would you ever lend a friend money?

I mean, I'm not talking about just picking up the tab after a night out.

I'm talking about thousands of dollars.

Well, I might if I could afford not to get it back, but I have definitely lended close to $1,000 before and I got it back.

Okay.

Well, I think it goes to show you lent it to the right person and that's super important.

On today's episode, we're talking about whether you should lend friends and family money.

Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds.

I'm Sean Piles.

And I'm Elizabeth Ayola.

This episode, we're going to be discussing informal lending, aka borrowing money from anyone but a formal lender.

But first, we're going to discuss a topic that you might have been avoiding, estate planning.

My favorite topic.

Yes, I know that's weird.

And I know this can be a morbid topic, but I really hate to see people pass or become incapacitated and then see their loved ones go through lengthy and expensive court processes, fighting over what happens to their assets or just struggling to make decisions on their behalf, especially when most of that could be avoided with an estate plan.

Yeah.

And as a general overview, an estate plan is basically a set of legal documents and a process that outlines how your assets, medical care, and guardianship of dependents will be managed and distributed after your death or if you become incapacitated.

They include things like a trust, last will and testament, living will, durable power of attorney, and advanced health care directive.

And I know that sounds like a ton of documents.

When I first started estate planning, I was like, what the heck is all of this?

But estate plans are usually divided into two buckets to make it easier for you to understand.

So bucket number one could be documents that cover you if you're alive, but are incapacitated or unable to make decisions.

And then the second bucket usually outlines what happens after you die.

And speaking of wills, did you know that fewer and fewer Americans actually have a will?

A recent study from Caring.com showed that only 24% of Americans had a will in 2025.

That's down from 33% in 2022.

And I'm not sure what happened to that 9%.

I mean, maybe they passed away or threw their wills in the fireplace or something, but not not a great sign.

Oh my gosh, in the fireplace.

But honestly, that statistic does make me sad.

And when you don't have a will in place, you could be leaving the decisions about what happens to your assets to the state, whatever state you live in.

And that sounds one, expensive, two, time consuming, and three, honestly, intrusive, because I do not want the state handling my affairs.

They're already all up in my money insert taxes.

Way too true.

Okay.

So I think a lot of folks have this idea that estate planning and establishing wills can be these really grim affairs, but I think about it a little bit differently.

Putting together your estate plan is really an act of love and compassion for your family and for yourself.

After someone dies, there's a lot of grief and anxiety.

So having your plan in place can make this difficult time just a little bit easier to navigate.

And if you're sick and you can't communicate how you want health care, it makes it so that you're getting what kind of care you want and your loved ones aren't left guessing what you might want.

I love that framing with you saying that it's an act of love and compassion for your family because I know so many people whose parents or spouses passed away and they didn't have an estate plan and on top of grieving they're confused about what to do with all of these finances and how to manage everything yeah and it can lead to a lot of infighting in a family too and everyone's already so stressed out and sad well if there are any reddit lovers out there there is an estate planning section of reddit so if you want to read some horror stories to motivate's probably not the best word but to get you going on that estate plan feel free to poke around in there i love to lurk on that subreddit it's so good but also sad at the the same time.

Very.

So Sean, do you have an estate plan?

A will, a trust, all of the above.

And then when did you create one if you do?

I do have an estate plan.

My partner and I both created our wills and advanced directives about four years ago.

Oh, awesome.

What motivated you to do it?

And what was the process like for you?

My partner and I decided to get serious about estate planning after I became a property owner in another state.

This got us thinking about our own assets and what we would want to have happen to them because before that, we basically didn't have assets and we weren't too concerned about it.

We were also engaged by this point, but had no set date to get married.

So, estate planning was a way to kind of bridge that gap to make sure we were taking care of each other, even though we weren't legally married.

The process itself was pretty simple.

We just used an online service that had templates for each state and adopted that, got them all signed, and that was that.

It sounds strangely romantic, Sean, that you guys did that together.

It is.

Again, it's an act of care.

We were doing this to support each other and make sure that we were looking out for each other if something horrible happened because, you know, there's no promise of tomorrow, as grim as that sounds.

There isn't.

And did you guys feel closer to each other after kind of going through all those difficult topics?

Yeah, I feel so fortunate that with my partner, every time we have a tough conversation, I feel closer to him.

And this is one of those processes where we were able to lay things out, talk about things we hadn't talked about before, and know that we would be able to support each other if the worst did happen.

And that's really intimate and loving in a strange way.

Beautiful.

Thank you.

So, do you have an estate plan, Elizabeth?

I do.

I created one in 2023.

and what really got me going was to stop overthinking it because as I said it can be a lot of documents, it can feel very confusing.

But I used Rocket Lawyer templates and then I had someone at Rocket Lawyer look over it just to make sure everything looked okay.

In terms of the documents that I use, I decided to go with a revocable trust.

And what that does is it takes effect while you're alive and it allows you to change the terms of the trust at any time that you want to.

For those wondering, girl, why did you create a trust?

I personally chose that because I have a young son and I wanted to include stipulations for when he can receive the funds.

Heavens forbid I die while he's young.

And a revocable trust also means that he could avoid probate in the event that I'm not here anymore.

That's really smart.

Probate, which is the process through which the state validates your will and manages the distribution of your estate, can take years to go through and it can be a huge emotional and also financial burden.

So what specific documents do you have inside of your estate plan, Elizabeth?

Oh my gosh, several.

Stay with me, guys.

So first, I have the trust document, which just basically outlines the trust and the terms of the trust.

I also have a durable power of attorney.

So that's the person who's appointed to make financial or medical decisions on my behalf if I'm unable to do that.

Next up, I have a living will.

That includes my medical care preferences in the event that I can't communicate them and the designation of a healthcare surrogate who makes medical decisions for me when I can't do that.

Lastly, I have a last will and testament.

Now, this is different from a living will because it says what happens once you're dead.

It outlines how you want your assets to be distributed after death and allows you to appoint guardians for minor kids.

So I'm able to appoint someone for my son.

I will say though, for anyone who's thinking about creating a trust, do not forget to place your assets inside of the trust, also known as retitling your assets, or you could still end up in probate.

Now, in terms of how you do this, that depends on the asset, but you may need to create like a property deed for real estate, whereas with financial accounts, you can designate the trust as a beneficiary.

Elizabeth, you're giving me a state planning Envy.

My plan is so much simpler than yours.

So I think I have my work cut out for me.

My partner and I are getting married in just about a month and a half at this point, which is kind of wild to think about.

But when we get back from our honeymoon, which is going to be, you know, three weeks in Japan, no big deal, I'm adding this to our to-do list.

It strikes me also that we should give folks a few to-dos of their own for estate planning.

And we don't want listeners to feel overwhelmed.

So let's just give folks three simple places to start if they haven't done any estate planning yet.

So, Elizabeth, do you want to kick us off?

I do.

And I'm going to start with my favorite one, which is a low lift.

I want or would love for everyone to review their beneficiaries on financial accounts like retirement accounts, bank accounts, investment accounts, life insurance, annuities.

And I want you to make sure that the people that you have on there, you want on there, or make sure that you have anyone on there at all.

So listing primary and contingent beneficiaries on retirement, bank, and brokerage accounts can help you to avoid probate.

Now, the beneficiaries that you leave on your retirement accounts override what you put in your will.

I slowed that down because I think it's so important to know and lots of people may not know that.

So you want to ensure that you have people that you actually want on there.

This is a cue to remove your ex if you're no longer with them or your best friend that you broke up with.

You also want to avoid putting underage kids as beneficiaries because that could lead to expensive issues if you prematurely pass away since some financial institutions often require court-appointed conservators to manage the funds on the child's behalf.

Now, also, if you have older teens or young adults, I want you to think about whether you want to leave them as a beneficiary because they might not be prepared to handle those assets.

It could be safer to set up a trust and assign a beneficiary to distribute those assets to them on your terms.

In my trust, I put stipulations for each age for my son.

So maybe like every five years, every decade, he gets a certain amount of money.

Now, last but not least, if you don't have a beneficiary, that could also lead to probate.

It could lead to exorbitant legal fees and potential estate tax issues.

So you want to check that you have one on your accounts.

And one thing I always like to emphasize when it comes to setting your beneficiaries is that this can be done in a matter of minutes.

You just log into your bank account or your 401k and you can set the beneficiary.

It doesn't take long.

Setting up a will can take a little bit of time to do in a trust as well.

This is one of the fastest and most effective ways to do estate planning.

Now, Sean, give us a second tip.

What you got?

So do your beneficiaries and then look into getting a will at least.

Make it easy for your loved ones to know where you want your assets to go and what your last wishes are.

A will will likely still have to go through probate, but at least it can determine what happens to your assets.

By the way, if you die without a will, you are deemed to die what's called intestate, which is one of the ugliest words in the English language and not one that I want to be associated with.

And if you do die intestate, your property will be distributed according to state law, which may not be what you want to have happen.

Just make sure it's a valid will.

So even if you do use one of those online services, it's worth it to pay to have an attorney to review review it to make sure everything looks just as it needs to.

That's right.

And if you keep putting it off because you think it's expensive, it'll be more expensive for your family to have to go through probate.

If you already have an estate plan in place, do not forget to update it when major life changes occur.

As Sean said, he's getting married.

So him and his partner are going to have to sit down and update that.

So Sean, I'm going to popcorn to you on that note.

If you've had any major life changes like getting married, a death, getting divorced, maybe having a new child, or even a career change, that could be be a good time to update your estate planning documents, whether that's a will, a power of attorney, healthcare proxy, trust and beneficiaries on financial accounts, all of that stuff.

And you also want to ensure that you have a fiduciary in the right roles for the task at hand.

Make sure that your team that's helping you through this process is the right set of people.

And also, maybe you've changed your mind about how you want to distribute your assets.

Like maybe you're suddenly in good graces with your sibling that you haven't talked to in half a decade.

Maybe you decide that you want to be composted in a mushroom suit instead of cremated or buried in the ground.

Wow.

And you want to update that in your will.

Make sure your desires are known and you can have them taken care of.

So all of these things would require updating your will and other documents.

Yeah.

This might be too much information, but I'm happy to share anyway.

But in my will, I have that I would not like to be buried in a graveyard.

I would like to be cremated and planted as a tree.

So poetic, isn't it?

That's beautiful.

Yeah.

I want to be composted.

That's why I mentioned that mushroom suit, because you can be composted and also put into a tree in a forest grove.

See, we were supposed to be co-hosts.

We're so morbid, Elizabeth.

I love it.

I love it.

I love it.

See, guys, estate planning can be, I don't want to use the word fun, but you know, these are important things to think about in terms of your legacy and things that you want to happen when you're no longer here.

I want to say it might be best to speak with a financial advisor or estate planning attorney, especially if you have a complicated estate.

Now we're about to dig into informal lending, including whether it's a good idea to lend your money to friends and family.

But first, listeners, you know the drill.

Take a second and think about what questions you have for us nerds and how we we can help you.

Maybe you have no clue how to approach estate planning or want to figure out how to approach tax planning for your retirement savings.

Whatever your money question is, we nerds are here to help you.

Leave us a voicemail or text us on the nerd hotline at 901-730-6373.

That's 901-730 and E-R-D.

You can also email us at podcast at nerdwallet.com.

All right, let's get to this episode's money question segment.

That's up next.

Stay with us.

Hey, everyone.

Remember a bit ago when Elizabeth and I told you that we were giving away some pretty cool prizes?

Well, the deadline is coming up and our prizes are still just as amazing as ever.

All you have to do is fill out our listener survey, and not only will you be helping us make the Smart Money podcast even better, but one person will win a pair of Sony ULT wireless noise-canceling headphones, and six people will win the Bagu Cloud Carry-On.

Which, as someone who's a nerd about both of those things, I can confirm they are some pretty great prizes.

Just go to nerdwallet.com/slash pod survey and complete the survey forum by September 15th to shoot your shot.

You can read the official rules for more details, which again can be found at nerdwallet.com slash pod survey.

Thank you and good luck.

Starting a business can seem like a daunting task unless you have a partner like Shopify.

They have the tools you need to start and grow your business.

From designing a website to marketing to selling and beyond, Shopify can help with everything you need.

There's a reason millions of companies like Mattel, Heinz, and Allbirds continue to trust and use them.

With Shopify on your side, turn your big business idea into

sign up for your $1 per month trial at shopify.com/slash special offer.

Charlie Sheen is an icon of decadence.

I lit the fuse, and my life turns into everything it wasn't supposed to be.

He's going the distance.

He was the highest-paid TV star of all time.

When it started to change, it was quick.

He kept saying, No, no, no, I'm in the hospital now, but next week I'll be ready for the show.

Now, Charlie's sober.

He's going to tell you the truth.

How do I present this with any class?

I think we're past that, Charlie.

We're past that, yeah.

Somebody call action.

Aka Charlie Sheen, only on Netflix, September 10th.

We're back and answering your money questions to help you make smarter financial decisions.

This episode's question comes from a listener named Jenna who sent us an email.

Hello, I graduated from undergrad with $26,000 in loans.

The cost of taking out four years of loans for the program on top of my undergraduate loans was going to be a tremendous burden.

My wonderful parents offered a solution.

If I used my almost entire savings to pay for the first year of tuition, they would pay the other three years of tuition and help with other miscellaneous expenses.

Thankfully, I was able to obtain multiple smaller scholarships to decrease the cost of tuition each year as well.

Since graduating about two years ago, I have worked hard on my undergraduate loans and will have them entirely paid off at the end of this year.

I would love to take the money I've currently budgeted every month for my loans, $1,000, and start paying back my parents for their loan.

We initially agreed upon paying back the full amount, $82,000, with 3% interest for inflation.

They told me to use the money for other expenses.

I am so thankful for all they have done for me and would still love to pay them back the full amount.

My plan was to open some type of account and auto-deposit $1,000 every month for the next six to seven years and surprise them with the money.

What is the best type of account to open knowing that the money will be accumulating for years and is intended for my parents and not for me?

Thanks, Jenna.

To help us answer Jenna's question on this episode of the podcast, we are joined by Kate Wood, an authority on lending and not a stranger to the pod either.

Not at all.

Thanks for having me.

Welcome back to Smart Money, Kate.

Thank you.

So Kate, our listener, Jenna, has some pretty generous parents.

They offered their daughter a loan for undergraduate education, something which isn't totally unheard of, but I find it really interesting as an alternative to traditional forms of lending, especially as someone with plenty of student loans myself.

And in this case, it's what we'd call a family loan.

A quick aside, I want to note that it seems like this loan is a really good deal for Jenna.

They got $82,000 with a 3% interest rate for inflation, they said.

And considering that the federal graduate student loan rate is currently at just under 8%,

that's not too bad.

But alternative forms and lending, which are essentially loans that aren't from a financial institution, come in a variety of forms.

Some are better than others.

And family loans are probably the best because hopefully you're you're on good terms with your lender.

So Kate, can you give us a little more information about how these work?

This was a really generous family loan that, you know, comes from

the user's family.

But I'd also mention that borrowing from different sorts of people would still be considered a family loan.

So the lender could be a friend, it could be chosen family, a coworker, a group that you're part of.

The main point with informal lending and family loans is that there is not a financial institution involved.

And a lack of a financial institution sounds to me like a lack of red tape too.

So what are some benefits of this type of informal lending, Kate?

Well, you already mentioned one with the red tape, right?

So there are definitely benefits to borrowing from someone who's not a like quote unquote real lender.

There's not a qualification process.

They aren't going to run a credit check.

Depending on, you know, their situation, how much you're borrowing, you might be able to get the funds really quickly.

Also, you know, like Sean mentioned, you might get a much lower interest rate or perhaps pay no no interest on the loan.

Although that might depend on the amount, because there's a really big difference between asking someone if you can borrow, you know, a couple hundred bucks for something short term versus borrowing, you know, thousands for a larger expense, as Jenna did.

Also, since you know the lender, they're your friend, you know, they're your family member, they also might be more sympathetic and more flexible if something comes up that makes it harder for you to pay back that loan.

I'm having an intrusive thought, guys.

I'm thinking about Judge Judy and friends suing their friends for not paying them back $20.

So with that said, what are the risks

of the informal lending?

Exactly.

So the biggest risk really is to the relationship, right?

So in this listener's case, her family offered to help pay for graduate school.

But for folks who are having to ask someone else for help, that asking, that can be a really stressful situation.

And if they turn you down, that could potentially put a strain on the relationship.

Even with a successful loan, there can also be potential relationship damage because it could alter or sort of create a power dynamic, right?

Say someone lends you a large amount of money.

You might then feel like they're looking at your social media like, hmm, looks like she ate out a couple of times this week, right?

You can feel like they're following you and judging you and say what you will about, you know, real lenders.

A real lender doesn't care

what you're doing.

The other downside,

so say you have a loan, again, like the listeners that's significant and you're being charged interest, but like say in this case, you're making repayments in installments.

If you're in that situation and you're handling those payments successfully, like, okay, one, that's awesome.

You're doing great.

But two,

you know, if you'd had an actual personal loan from an actual lender, those on-time payments would be reported to the credit bureaus.

That would potentially be helping you, right?

So an informal loan on one hand, no qualifications, not going to hurt your credit score, but it's not going to help it either.

Do you have an idea of how common it is for parents to do sort of informal loans to their kids?

Is that a thing that's widespread in the education space?

It's a little hard to say because again, informal lending is informal because this is person to person, because it's not going through lenders, it's harder to get a grip on, right?

So if I borrow $5 from you for coffee, technically that's informal lending, right?

But again, even if it's a much larger amount of money, even if you have a written agreement, something like that, you're not going through a lender, you're not going through institutions.

And so nothing is really being tracked about the loan.

If we are just talking more in general, money for higher education, like that, you can put some numbers on.

So Sally Mae every year does a study of how Americans pay for college.

And so it doesn't get into whether these funds are being used with an expectation of repayment.

So is this, you know, essentially a gift or is it being lent?

But it does show us that in general, parents make a pretty sizable contribution.

So during the 2024-2025 school year, on average, parents and income or savings covered 38% of college expenses.

So that's the largest share.

So if you're looking at every way that the average student got money, almost 40% coming from their parents.

Parent borrowing.

So in that case, that would be a parent who's taking out a loan on behalf of the student covered another 11%.

Another type of informal lending that I find really fascinating is the idea of a lending circle.

This form of saving and lending money has been around for centuries.

It's been used around the world as well, and it's really effective.

And here's how it works: so, a group of people gets together, maybe friends or coworkers or family members, and each person puts in a certain amount of money into the pool on a regular basis, maybe like $100 or $50 a month.

Then each person takes their turn getting that pot of money.

It's really one of the most effective forms of direct mutual aid.

And I recently read this article about how in South Korea, some lending circles will help one another say for group vacations together, which sounds so sweet and wholesome.

And I just love that.

And in some places, lending circles will also develop into broader mutual aid organizations.

Like there's a nonprofit in Portland called Equitable Giving Circle, which provides community support for the local BIPOC community.

And the thing is that lending circles are really built on trust and they can be more common in societies like South Korea that have greater amount of trust among its members.

So I would love to hear your thoughts on this idea and also whether either of you would ever join a lending circle.

I don't know if I would necessarily join one.

I think it would really depend on who the group was and what the amount was.

Like if it was a small amount of money and it's a group of people I trusted.

Absolutely.

But if it was something more general, I'd probably be pretty hesitant.

One thing I would mention, like, so I have heard of these referred to as saving circles, but because there's this rotating payout, depending on when it comes to you, it might be more of a saving circle, or it might be more of a lending circle.

So like if you're someone who gets the pot relatively early, it feels more like lending, right?

Because you're sort of getting this money and then you're gradually paying it back, right?

Because you're paying in.

But then for someone who gets it later, it's a little more of like a savings mechanism since you're basically putting money away and then eventually you're getting a payout.

Elizabeth, would you ever use one of these?

Well, I have.

So I'm Nigerian, for anyone who doesn't know, and we have something called Adjaw.

So years ago, I joined an Adjo with a group of other women, and we all contributed, maybe it was around the time when I was living in London, £150 a month.

And it was nice, as Kate said, to be on the later end of that because I would get a large sum of money when it was my turn that I could use for whatever I needed to use it for.

So I participated in it for probably about two years and I found it really helpful.

And did you find that you joined it because you could trust the women that were in it?

Or how did you handle that aspect of this?

Because it is all about trust.

That's a huge one.

And honestly, I didn't know all the women in it, but the woman who invited me is someone I trusted.

So people I trust, I usually tend to trust people they trust.

So definitely a gamble, but we never had an issue where someone didn't pay or we came up short.

Everyone did their part.

So.

I love that.

I have never joined one, but I would with the right people with the right amount.

Like you said, Kate.

Like if it was my really close college friends and we were all trying to save up for a vacation together, I would love to do that because it means that some people who maybe wouldn't be able to afford to go on an international vacation could join us for that if we're each putting in a certain amount of money on a regular basis.

But I wouldn't do it with maybe like my neighbors or coworkers.

No offense.

Hey, no,

absolutely not.

Love you guys still, though.

All right.

I think this is a good segue to what guardrails people should have in place before going into the informal lending route.

I say have everything in writing when possible.

I really, really, really hate when relationships end over money.

Totally agree.

And you are right.

So this is one of those things, you know, like getting a prenuptial agreement or a cohabitation agreement, if you're rooming with somebody where creating that formal agreement feels really awkward.

But if you have more than a handshake to go on, it's going to help a lot if anything arises later.

That said, informal lending, this isn't something where, you know, you need a lawyer.

Although I will say, if you make an agreement and you get notarized, that will boost its credibility just because you do have a neutral third party who can attest to that, like, yes, everything was good.

The lender and the borrower signed off on it.

This is legit.

If you do have to go to Judge Judy, you can bring that,

right?

You can bring it

to Judy.

Like, no, they, they said they would do this, right?

And so the agreement can be pretty simple.

You know, it can just state the amount, the repayment schedule, how interest is going to be dealt with, and then also, you know, what would happen if the borrower fails to repay the loan.

Obviously.

Again, this is not something you're using in a like, hey, can you spot me 20 bucks?

These days, really, for a lot of people, they just use Venmo, right?

Or something like that to just ask for that money to be paid back.

But if we're talking about a loan that is a significant amount of money for the borrower, the lender, or, you know, both, it's really important to hash these things out before that cash changes hands.

Yeah, I think your note about Venmo is interesting because we're all kind of doing informal lending on a micro level all the time through covering a friend when you're going out to eat or grabbing a quick drink.

Yep.

But in a broader sense, if you're not just doing 20 bucks for a beer and a night out, when should people consider informal lending options over more traditional options?

informal lending can be helpful in a couple of different ways so it can help a lot if you are in a situation where you might not qualify for a formal lending option and it can also be really helpful if you're in a spot where you do have uh lending options but they would be really costly so a payday loan would be a good example of that on the other hand if you are someone who qualifies you don't have to get into that messy emotional stuff, right?

If you're working with a lender, a missed payment dings your credit, but the lender's not, you know, mad at you.

You aren't going to have awkward holidays because they're holding a grudge.

Again, though, there's a really big difference between the listener's situation where her parents are making this really generous offer and one where you are, you know, basically like cold approaching, cold calling, like cold, cold going up to, right, someone that you know to ask if, you know, they'd potentially lend you money.

Like this is, this is a delicate situation.

And so, you know, you want to be really sure that you're clear about, okay, this is what I need.

You know, this is how much, this is when, this is why, this is, you know, how I can pay it back.

Ideally, you don't want to put them super on the spot.

You want to give them a little bit of time to think it over.

And bear in mind, too, that, okay, you know, they aren't running a credit check, but they might ask you about your finances.

And in this circumstance, that is very fair, right?

It's also important to think about how you might not know everything you think you do about their finances.

You could be looking at someone who has a high-paying job.

They seem super well-off.

You know, you're sure they have plenty of money.

They could actually be living paycheck to paycheck, and you don't even realize that.

That reminds me of some advice that my mom gave me that lives rent-free in my head, which is don't lend what you can't afford to get back.

Let's move on to the medagenist question.

They want to know the best place to house $1,000 a month for the next six to seven years to get maximum growth on the money they want to repay their parents.

What would you do in this situation, Elizabeth?

Well, since you asked,

although this is a medium-term goal, I personally would place it in a high-yield savings account.

So assuming Jenna made an initial deposit of, let's say, $1,000 in an account that compounded monthly and gave her, let's say, 4% interest and also contributed $1,000 a month, they'd have about $98,000 after seven years.

Now, the only major risk here is that the interest rate on their high-yield savings account could fluctuate.

And also, Uncle Sam would get his cut because interest earned on high yield savings accounts is taxable, guys.

Sean, where would you put that money?

Jenna mentioned potentially putting it into a brokerage account.

I think that your route going the high yield savings account option is a really conservative and smart approach, but we often suggest that people don't invest money they need within five years.

Well, Jenna wants this money within six to seven.

So I'm going to say, quick disclaimer that, you know, I'm a certified financial planner, but I'm not everyone's certified financial planner.

And this is not investment advice.

But I would probably put this money into a taxable brokerage account to try to get as much growth as possible in the time that I have because six to seven years isn't nothing.

You'd want to see something come of that more than what you could get at a high-end savings account.

And investing would likely give you that.

So I would put it in some sort of taxable brokerage account, invest in a few ETFs to have a diversified portfolio, and just see what I can get, kind of roll the dice there.

All right, Kate.

So in conclusion, what should people keep top of mind if they are considering informal lending?

Either lending or asking someone to borrow the money i would say the biggest thing to keep in mind is what risk you might be putting the relationship under you know i keep using these examples where it's like oh it's really minor like we're all going out to brunch kind of thing that's different than if you're looking at three four five digits in terms of how much you're trying to borrow or how much you're willing to lend so really knowing that you could be putting the relationship at risk, but also if you trust this person, this is is something that could theoretically actually strengthen your relationship, right?

Because then it's something that you've gone through together.

Well, Kate, thanks for coming on and chatting with us today.

Of course.

Thank you for having me.

That's all we have for this episode.

Remember, listener, that we're here to answer your money questions.

So turn to the nerds and call or text us your questions at 901-730-6373.

That's 901-730-NERD.

You can also email us at podcast at nerdwallet.com.

Join us next time to hear us answer a listener's question about car buying.

Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio, to automatically download new episodes.

And here's our brief disclaimer.

We are not your financial or investment advisors.

This nerdy information is provided for general educational and entertainment purposes, and it just might not apply to your specific circumstances.

This episode is produced by Tess Wiglund and Ana Hilhoski.

Hilary Georgie helps with editing.

Nick Charissomi makes our audio.

And we want to say a humongous thank you to NerdWallet's editors for all the wonderful ways ways they help us.

And with that said, until next time, turn to the nerds.

Martha listens to her favorite band all the time.

In the car,

gym,

even sleeping.

So when they finally went on tour, Martha bundled her flight and hotel on Expedia to see them live.

She saved so much, she got a seat close enough to actually see and hear them.

Sort of.

You were made to scream from the front row.

We were made to quietly save you more.

Expedia, made to travel.

Savings vary and subject to availability, light inclusive packages are at all protected.