They already gave her wine, a small gift, and paid for her parking permit as thanks for her pet sitting
OP didn't bring it up again because he knew it was going to cause drama
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He was already thinking of giving her money to avoid the headache but his wife thought he should talk to his sister
So, OP talked to his sister and told her that she was more than welcome to eat the food they have at home during her stay but she might have to buy the perishables like milk & eggs
He also denied her request for one of her friends to sleep over. She wasn't happy with his answer.
His sister told him to find someone else to watch their dog since he won't agree to her terms. Fortunately, someone from his wife's family stepped up to watch the dog.
She was testing the waters when she asked if she can have some money but she overplayed her hand when she added a friend staying over
She probably wanted to get what she could from the situation since OP owed her one
She will definitely sulk for a while but if they approach the misunderstanding carefully, OP doesn't have to worry about permanently changing their relationship
She was acting like a highschooler who wanted to fool her parents into financing a house party while she's alone
OP did clarify that he was cool with his sister's friend visiting but he wasn't comfortable with them staying the night especially since they haven't met before
It's unclear when she brought up the money part but OP should have expressed his discomfort when she did instead of waiting for his wife to encourage him
One of the comments said that they were all acting immature and should have communicated calmly instead of taking everything so personally
It definitely was a sibling squabble, but it's not the relationship-ending kind. OP needs to talk to his sister when he gets home from their vacation, but the problem isn't as unsolvable as he thinks.