How to Ask Your Parents for Money (Rules, Tips and Tricks)

As a financial journalist, I can tell you how to ask your parents for money in an appropriate fashion. Whether you think it's acceptable or not, 60% of Millennials accept financial help from their parents. And these aren't college age kids, the metrics used in the report referenced above are from a survey of post-college twenty-somethings. Blame it on the recession, failure to launch, yada yada yada. I'm not here to debate the finer economic points of adult children accepting money from parents.

Primarily because as a chronicler of awkward money conversations, it's my job to comment on etiquette and not circumstances.

I'm also not going to weigh in on if I think it's appropriate or not, because I'm an adult child who has accepted financial help from her parents.

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Borrowing money from “The Bank of Mom and Dad” isn't something I make a habit of, but during the runaway renovation of 2013 I did take on an interest free loan from my parents, who graciously offered their help during a time when I was losing my mind and my savings account.

I borrowed $3500 to get my contractor out of my life and I paid them back within the year, sending them quarterly invoices and everything.

It also doesn't have to be a loan for a special project or living expenses. More and more parents are gifting their children large home down payments, cash to minimize tax liability, and of course, shelling out for the booming wedding industry.

But no matter what your circumstances, here are some tips for helping you navigate taking on loans from parents. (Which I recommend moreso than say, taking money from friends. You can read about that here.)

How to Ask Your Parents for Money: 4 Tips

Thoughtfully Consider The Ask

I hate cliches, but in this instance I feel two are really appropriate: “honesty is the best policy” and “it pays to be prepared.” When asking someone (anyone, really) for money it pays to be up front and speak plainly about your needs.

Timing is everything (another cliche!). When inquiring into people's personal finances or broaching the topic of money it pays to pick your moment well, but don't catch them off guard. Warm them up by mentioning casually that you'd like to set some time to talk about finances, your estate, xyz. Then say, “I feel (x time, day or event) would be appropriate. What works for you?”

Just because they're your parents doesn't mean you shouldn't treat it like a business meeting. Letting them know in advance it's going to be a serious conversation rather than a catch-up dinner allows them to come prepared and with their defenses down. No one likes to be taken by surprise.

Put Together a REAL Plan for Paying It Back

Even if they're Mom and Pop, even if they can totally afford giving you thousands of dollars, you should aim to pay them back. The except is, of course, if they give you money and tell you it's a gift. If the word “gift” doesn't come out of anyones mouth, either clarify or assume it's a loan.

If it's a loan you should discuss with them a repayment timeline, finding out what they're comfortable with, if any interest is involved (some parents do charge a very low amount of interest on principal) and then when you'll be making payments. Every month? Every quarter? One big lump sump annually?

Once you've figured out how the loan is going to be structured, you need to put it in writing. This is the most crucial step! I know this can be a pain (who likes unnecessary paperwork, especially for someone as close as your Mom and Dad), but it helps keep things more business-like, which can come handy if the money ends up causing discord down the road.

Besides, borrowing money is not the time to be ambiguous no matter who you take the money from. You know this. Get your head out of your butthole.

Prepare for it To Be Awkward

This depends on how close you are with your parents and how intimately they know the details of your finances. I know for me, when I took money from my parents and was on a quarterly repayment plan, I felt guilty any time I mentioned I was going on a trip. This was a particularly wedding travel heavy year, and they never said or did anything that forced me to feel this way, but I did feel strange.

I got very lucky in this respect that my parents chose not to pry, but honestly, if you're asking Mom and Dad for money, it opens the door for them to comment on how you're living your financial life. Even though you're paying less in interest, you may be paying for it more in lack of privacy. Not to discourage you, but this is another thing to think about before you take on a loan from your parents.

So my final tip is to tell you to prepare you for this consequence of taking money from family as opposed to say, a bank, or private online lender. You can get a better interest rate (hopefully), but there are always going to be emotions involved.

P.S. If you're a parent thinking about loaning money to adult children, I like this article from Market Watch.

 

What do you think? Have you ever taken a loan from “The Bank of Mom and Dad?” Are you a parent who has given one of these loans? Would you ever give a loan to a kid? 

Need money for a down payment or other expense? Here's how to ask your parents for money without looking like a complete jerk.

 

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  • Roberts antony
    October 5, 2016 at 9:59 pm

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  • Cat Alford/ Budget Blonde
    April 6, 2016 at 5:55 pm

    Yes, I’ve had to borrow money from my parents (and in-laws) in the past and luckily it has gone pretty smoothly. We did the things you suggest to make it as business-like as possible.

    • Lauren Bee
      April 17, 2016 at 10:43 am

      Makes things so much easier.

  • eemusings (NZMuse)
    April 4, 2016 at 5:45 pm

    Ooooh yes. I (reluctantly) accepted help (a generous loan, not a gift) with my down payment. It made them really happy to help (“rather you pay us than the bank”), and since I hate owing others, I’m making repaying them a priority.

    • Lauren Bee
      April 17, 2016 at 10:43 am

      I think because it is family, we’re more diligent about paying them back faster than with a faceless bank, ya know?

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  • 101 Centavos
    February 15, 2014 at 11:47 pm

    Were I your parents, I would have charged you at least 3% interest.

  • Lisa E. @ Lisa Vs. The Loans
    February 15, 2014 at 6:11 pm

    If anything, I’ve loaned money to my parents. It’s a very reversed household over here. Personally, if I were in your shoes, I would pay off the loan to your parents first, even though it’s at 0% interest. Why? Because the sooner that debt is gone, the better. If you hold off on it, there might be a temptation to “hold off” on paying in back in the future. Especially with no real deadline, that could be dangerous.

  • Mel @ brokeGIRLrich
    February 10, 2014 at 5:11 am

    Mine was the bank of grandma and it actually stressed me out more than loans with interest rates. I felt so guilty whenever I did something expensive – like in the middle of repaying her, I planned a trip to Peru. She was not keen on me going, but we had set an amount I would pay her every month and at that point I was paying twice that to her without ever missing a payment. The worst that happened during the entire period of the loan was two months when I was unemployed and had to drop back to the minimum payment amount – but, being my grandma, she yelled at me for even giving her that at the time.

    I think family loans come with psychological interest.

  • Dear Debt
    February 10, 2014 at 2:03 am

    I say pay your parents back first. Family and money can get awkward real quick. That is great that they were able to help you out in a hard time. When I went to graduate school, I asked my parents if I could take a small loan at 0% interest, as my grad loans are 6.8%-7.9% interest: they LOL’d in my face. It was kind of brutal, but it’s been a huge lesson for me. I work so hard to pay off my debt and hustle hard to make sure I can handle my business.

    I think it’s important to pay back your parents first, out of respect, but that’s only my opinion. Good luck and just keep going. You will get where you need to be!

  • Danielle
    February 10, 2014 at 1:13 am

    I was put in this situation a few years ago (See here:http://househippo.org/2012/10/07/borrowing-from-family-sometimes-there-is-something-worse-than-high-interest/) from an un-requested loan offer that turned into a nightmare. I would check with them first to see what type of time period they are comfortable with, and if they have any upcoming need for that money, just so you don’t have any awkward conversations in the months to come. Honesty on both sides helps.

  • Michelle
    February 9, 2014 at 11:15 pm

    I think it is very common for parents to help their children. I think that as long as everyone is clear is this a loan/gift? If it’s a loan, I would pay it back immediately. Your parents will appreciate it-even if they don’t need the money. If it’s a gift use it in the way you said you would. When I’m a parent my giving will depend on the situation and if the child is responsible. If I have a kid who is a hot mess, I’m not paying for that. If I have a kid who is consistent-then I will give depending on the situation. I don’t loan money. I even have a line item in my budget for these moments.

  • Stefanie @ The Broke and Beautiful Life
    February 9, 2014 at 3:17 pm

    Even though personal loans are interest free, I like to pay them down first. I just hate having them hanging over me.

    • Mrs. Pop @ Planting Our Pennies
      February 10, 2014 at 2:41 am

      Actually, legally they shouldn’t be interest free. The IRS requires that there be an interest rate at or above the current prime rates, otherwise the money should count as a gift and (if large enough) be subject to applicable gift taxes.

  • jim
    February 8, 2014 at 2:05 am

    From someone who has been there and done that, this is NOT a tough call at all. Pay your parents off asap. It’s a matter of pride and you can’t put a price tag on that. Speaking from experience.

    • Cashville Skyline
      February 8, 2014 at 11:08 pm

      I would likely feel similarly about paying back my parents. Even though it’s a 0% loan, my parents don’t have a lot of money, so I know it would mean a lot to them if I prioritized their repayment. Even though they said there’s no timeline, do you think there’s a certain point when they would start asking about the repayment?

  • Creativeme
    February 8, 2014 at 12:17 am

    I’ve made that tough call in the past. It was the bank of grandparents for me. In a gesture of good faith, I wrote out a promisary note with a firm (but gentle) payment plan. And post-dated checks for a manageable amount each and every month. With every check that was cashed, or big lump sum (if I was able) I sent a notice of the balance still owing to let them know I was taking the debt very seriously. My grandpa said he was very proud of me, and it took away the friction (while leaving room to pay down other stuff too)

  • Christine
    February 7, 2014 at 9:33 pm

    In times like these you do what you must to stay afloat. I moved to Maryland to do an internship at 21 thinking I’d need no help from my parents because I had an income and a boyfriend who was going to pay half of the rent. Well, that boyfriend NEVER MOVED TO MARYLAND and left me with an apartment rent that equaled more than my monthly paycheck. It really sucked to ask my Dad for help at the time but I was so thankful he was able to help. I don’t think there’s any shame in doing what you need to to keep your head above water. This must be a really hard time for you so I think you just do whatever you think is right to get by and thrive. Good luck. 🙂

  • Leah
    February 7, 2014 at 5:22 pm

    You’d be very surprised by how many people have outstanding loans from parents, so you are SO not alone!

    I see them in my client’s financial lives ALL the time, and the overwhelming majority of people want to pay their parents back before credit cards, etc. due to what I’ve dubbed “high emotional interest.”

    I’ve seen in my clients–and I believe the same will apply to you–having a truly urgent *desire* to pay back your parents will add rocket fuel to your overall debt repayment plans.

    You can do this!!!

  • Sara
    February 7, 2014 at 4:31 pm

    How well do you know your parents’ finances? If they don’t need the money any time soon they may feel better having you hold off for a while and get yourself in a better position before repaying.

    If it makes you feel more comfortable, have them write something up about this being an advancement from their estate (inheritance while they’re living) that you can then tear up once you pay them back.

    My perspective is that money is inter-generational and that you should leverage the resources you have. If your parents play a role, who cares? Seriously, who cares? There is a difference between mooching and leveraging.

  • Mrs PoP
    February 7, 2014 at 3:59 pm

    Maybe it would make it easier to think about for everyone involved if you made a contract and paid interest on the loan from your parents. That’s what we did with Mr PoP’s parents. We had a signed contact (thank you legal zoom) and a fixed interest rate and payment plan, etc. It made it a lot less awkward than it might have been otherwise I think – and also let us do a little more investing before paying them back since we didn’t feel pressured. After all, we were paying them much better interest than any cd would have at the time!

  • Bridget
    February 7, 2014 at 3:59 pm

    I’m pretty strongly against accepting financial help from your parents as an adult, so I say get rid of the loan ASAP and never borrow again.

  • SavvyFinancialLatina
    February 7, 2014 at 3:49 pm

    I think family should be paid off first. That way there will be no potential hard feelings between your parents and you.

  • Blake @ BeanCounterByDay
    February 7, 2014 at 3:17 pm

    First off, it’s so great that you have a loving family that is willing to help you out. I come from the same type of family, and it’s definitely not lost on me how lucky I am to have that.

    That being said, I know I would feel the same way about having to take money from them. I think using that loan to gain some momentum could be a great thing. You’ll likely try to cut expenses to be able to pay more each month, and then transferring that payment to the next debt would definitely get the ball rolling.

    What kind of renovations were you doing? I think that is one of my favorite past times 🙂

  • Jeff
    February 7, 2014 at 3:14 pm

    This is a pretty tough situation to be in, but thankfully the loan amount isnt too big (if I understand correctly it’s 2.5k right now). If I were you, I’d pay your parents back first. I think they cut you some slack after they saw how well you were doing in NYC and when you moved back to GA. Your situation was pretty unique and I’m sure they probably felt pretty bad for you.
    Pay them back first, and consider the extra $100-200 you’ll pay in interest to the credit cards the price of a great relationship.

  • Kendal @HassleFreeSaver
    February 7, 2014 at 3:08 pm

    I understand how humbling this must have been for you, but it’s great they were able to help you out in a tight pinch. I agree with other commenters here – pay off your parents first since this debt is clearly bugging you. We all know there’s no “right way” to pay off debt, and some experts suggest paying off the smallest balance first to help spur momentum for other debt repayment. It’s your call of course, and I’m sure whatever you decide is what’s best for you.

  • Dee @ Color Me Frugal
    February 7, 2014 at 2:01 pm

    Hmm, tough call. If you choose to pay off credit cards first, how long do you think that would take? If it is just a few months maybe your parents would not mind. But if it’s going to take a long time maybe you could start with paying your parents something like $100 a month while you funnel the rest of your cash toward the credit cards. Or just pay them back first if that would make you feel better. When I run into scenarios like this I tend to come to an answer by asking myself what’s going to help me sleep better at night- the solution that helps me sleep better is usually the one I go with.

  • Jordann
    February 7, 2014 at 1:25 pm

    This is a very good post. On the one hand you have a family, on the other hand you have interest. In this case, I think it’s ok to say screw the interest and pay off your family loan first. It’s not a huge loan, you could probably pay it off very quickly, and then you’d get rid of any awkwardness around your family members (imagined or not).

    Have you looked into 0% balance transfer credit cards? That might help make this situation a little bit easier.

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