Giving cash may make the situation worse by feeding the underlying problem, says a Tough Love supporter.

Family members or friends sometimes need financial help. They ask for money or it might be offered. But at times, the best financial help is advice, not hard cold cash.

Lending and/or giving money to family and friends is fraught with risk. By "rescuing" someone financially you may do them a disservice, says Peter Altmann, board member at Tough Love.

Parents who want to pay off motoring fines to get their children out of trouble, for example, could be setting the scene for the child expecting to be bailed out every time something goes wrong.

On the other hand, money spent on a service that helps give that child a leg up could ensure they are financially independent for the rest of their lives.

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There is no one-size-fits-all answer to helping friends and family in financial need. A friend was lent $80,000 out of the blue for a house that she thought she would never own. It was an unsolicited offer. The lender trusted my friend and knew it would be paid back.

Whether lending money or refusing is the right thing to do will depend on a matrix of circumstances, including why the person needs money in the first place, and their attitude to repayment.

Sometimes, says Altmann, handing over the cash might actually make the situation worse. If the child or some other relative is a serial debtor, you could be feeding the problem. "You have to look at who got into the debt. If it was the relative, the debt is their problem."

Just because you have the money doesn't mean you should gift or lend it automatically.

Altmann talks of famed investor Warren Buffett's children, who caught the bus to local public schools, weren't showered with money and have made their own way in the world. Buffett, despite being a billionaire, did a good job of encouraging his children to be financially independent.

Some parents just give in, says Altmann, to avoid conflict and get a little bit of peace. Yet if you do for your child what they could have done themselves, you are denying them the opportunity to learn.

Lending or giving money to offspring is a completely different dynamic to other family members such as siblings and their spouses. In fact the spouse muddies the waters. They may be more demanding or entitled, or have different values when it comes to how money is used or repaid.

When the transaction happens as a result of a request, it may put the giver in a position of being able to set conditions.

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Those conditions could be agreeing to a repayment schedule, writing a budget, or visiting a budget adviser if the lender doesn't have the wherewithal to help.

A creative solution where relatives are feckless might be to save towards their children's education, rather than giving the parents more money to blow. That way you're showing willing but not feeding the monster.

People with financial crises sometimes resemble possums in the headlights - frozen with fear. In that case it can be helpful to offer to research their options and/or help them negotiate with creditors.

Sharing your own story is a good starting point. Your relative may think you're "rich" but not have thought through your situation. Perhaps you buy your clothes at the op shop, and you penny pinch on the grocery bill, which is why you have some savings.

There is a big difference between people who want money because of lifestyle choices past or future, and those who need it to move ahead by buying a house or a business, paying for study and so on.

Those differences aren't always clear cut, however. The person in financial trouble may on the surface need to pay essential bills such as rent, utilities and school uniforms. But how did they get to this situation? And why does the person have no savings? It's a problem that KiwiSaver trustees face every day with hardship withdrawal requests.

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If the person has spent their way into this situation, then they'll most likely do it again, says Pushpa Wood, director of Massey University's financial education and research centre. "In that situation my suggestion is to say, 'What is the money for?' I would ask 'Do you need it or do you want it'?"

It's a good idea to ensure the borrower has some skin in the transaction. That transforms the situation from one of throwing good money after bad, to becoming an enabler of change.

Altmann's son wanted $5000 for a car and was somewhat put out when his father offered to pay half if the son could save half. It worked. The then teenager got a job and saved the money.

Altmann cites the example of a family in which an adult daughter's business was in trouble and ultimately failed and she was left owing money to the parents.

The daughter had genuine difficulty paying it back, but was willing to make payments. The parents eased back on what she was expected to pay and ultimately wiped the remainder of the debt "because she took on the right attitude".

Sometimes it's possible to offend people by offering them money. When Wood was first married, an Indian friend offered her and her husband a loan towards their first home.

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"She was a close friend who had a typical Indian mentality of 'thou shall not rent'." Wood's husband, being from a different culture to his wife, was offended.

It's a lesson in not making assumptions, says Wood. Not everyone wants the world to know they're suffering financially. "Accepting money can be indirectly declaring their failure to manage their money," she says. "If you want to help, you need to establish that relationship of trust with them so that it is not taken as pity, charity or meddling."

It's common for Indian families to help each other out financially, says Wood, especially with weddings. When friends and family get married people club together and pay some of the costs as a gift.

In the New Zealand context, says Wood, a relative with money to spare could provide some for furniture when a family member buys their first home.

There are times when handing money over, no matter what the need, isn't the best. Wood talks of two brothers in her extended family who have borrowed money. One was spendthrift and the third time she was asked she gave the money, but said, "I don't expect it back, but I don't expect you to ask for more."

When the second brother also borrowed, he outlined his repayment plan and stuck to it - paying the debt off over 12 months. Wood will lend to him again if needed.

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If you do lend money, it needs to be on the understanding that you may lose it. Even if you trust the recipient implicitly, and the financial problem is no fault of their own, the agreement can go awry very quickly if their personal circumstances change. A new spouse, illness or unemployment could put them in a position where they may no longer be able to make repayments. Sometimes the creditors with the nastiest bailiffs are the ones that get paid, not the family who lent in good faith.

As well, there is always the risk that the family member dies. Unless they have capital or a life insurance policy it's very unlikely you're going to get your money back. That's the end of it.

Whatever you do, have a written agreement, says Altmann. That way there can be no confusion.