Should I Loan Money to My Nanny?
You have a nanny that has been with your family for years. She is a beloved member of your family. She has recently come to you indicating that she would like to borrow money from you. What should you do?
- Generally, personal loans are not advisable. You may offer to help your nanny find alternate funding. Such help may include calling local banks to see which bank charges the lowest interest rate; such help should never include agreeing to co-sign a bank loan for your nanny.
- Remember that no matter how familial the relationship may feel between you and your nanny, your nanny is ultimately your employee. With that in mind, a payroll advance is not advisable, but it may be preferable to causing your nanny to feel like you are not responsive to her situation. If you choose to grant your nanny a payroll advance, have your nanny sign and date a payroll withholding authorization. This authorization should specifically state how much money will be withheld from which pay checks until the payroll advance is fully repaid. (Hint: the repayment timeline should be as quick as possible without causing further harm to the nanny’s finances.) The authorization should also address what will happen in the event that the nanny’s employment ends before the advance is fully repaid. For example, the authorization may include a “balloon payment” clause which allows you to withhold from the nanny’s final paycheck the full remaining balance of the payroll advance. (Hint: laws vary from state to state on the enforceability of certain provisions of payroll withholding authorizations. Please consult with an attorney in your state for additional information on this topic.)
- Do not pry into why your nanny needs to borrow money. If your nanny freely volunteers this information, you can provide supportive words to comfort her as she is likely experiencing stress over her circumstance. Do not offer her financial or circumstantial advice unless she specifically asks for your advice. If you feel that you must inquire about your nanny’s need to borrow money, keep your questions job-related. For example, you may say, “I don’t want to pry, but I do need to ask you one question. Is there anything happening in your life that I need to know about, that could affect the children, or that could affect this household? If you say ‘no’, then I don’t need to know anything more.”
By following the above tips, you will handle as professionally and successfully as possible the difficult situation that is your nanny’s request for a loan.