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

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As a finance writer, I can tell you how to ask your parents for money in an appropriate fashion, because whether you think it's acceptable or not, the reality is that 60% of Millennials accept financial help from their parents.  

 

And these aren't college age kids, might be accepting financial help from parents to get through school. The metrics 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 whether or not adult children should accept money from parents.

 

I won’t weigh in because I'm an adult who once accepted financial help from her parents. 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 both my mind and my savings account.

 

For those looking for advice on how to navigate the ask and what comes after, below are my best tips.

 

 

How to Ask Your Parents for Money

 

 

Exhaust All Other Options

 

 

It depends on your individual family dynamic and the interest rate you’d get on a personal loan. Personally, I think mixing family, friendship and money gets very messy, which is why I’d try to investigate other options before taking money from parents.

 

Keep in mind they have may have their own financial goals and obligations. And as an adult, it’s important to stand on your own two feet. 

 

Parental loans should only be used in the event of a dire emergency when other options simply aren’t available.

 

Hesitant to take money from Mom and Dad? Even at 0% interest, it might not be the best idea. As an alternative, take a look at personal loan options from Earnest Personal Loans. In addition to your credit score, they take into account your employment history and career trajectory and offer some of the most reasonable APRs in the personal loan market.

 

Thoughtfully Consider The Ask

 

If you’ve exhausted all options and can't make anything else work, it’s time to consider how you’ll ask your parents.

 

I hate cliches, but I feel two are really appropriate in a borrowing money situation: “honesty is the best policy” and “it pays to be prepared.”

 

When asking parents (or anyone, really) for money it pays to be up front and speak plainly about your needs.

 

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. 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.

 

Taking Money from Your Parents Means They May Pry

 

 

This depends on how close you are with your parents and how intimately they know the details of your own 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.

 

At the time, it  was a particularly wedding travel heavy year, and although my parents never said or did anything that made me feel guilty, 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.  You won't like it, but it's perfectly acceptable since you took their money. 

 

Nothing is ever free. Honestly, even though you're paying less in interest, you may be paying for it more in lack of privacy.

 

If you take money from your parents, just prepare you for the consequences of taking money from family as opposed to say, a bank, or private online lender. It could work out swimmingly, and you can get a better interest rate (hopefully), but there are always going to be emotions involved.

 

 

 

Taking Money From Parents as A Gift

 

 

Taking money from your parents doesn’t only apply when it’s a loan for a special project or living expenses. More and more parents are gifting their children cash for buying a home, student loans, and wedding expenses.  cash to minimize tax liability, and of course, shelling out for the booming wedding industry. For those lucky enough to have large cash gifts offered from their parents, below are some resources on what you need to know.

 

 

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

 

Put Together a REAL Plan for Paying It Back

 

 

 

 

Even though it is Mom and Pop, even if they can totally afford to give you thousands of dollars, you should aim to pay them back.

 

The exception is, of course, if they give you money and tell you it's a gift. If the word “gift” doesn't come out of anyone's mouth, either ask for clarification or assume it's a loan.

 

Here’s what else you should hammer out before money changes hands:

 

  • If it's a loan, discuss with them a repayment timeline and find out what they're comfortable with.
  • Discuss if any interest is involved (some parents do charge a very low amount of interest on loans to children) and if so, how much.
  • Clarify 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. As much as I hope this doesn't happen to you, getting it writing is handy if the money ends up causing discord down the road.

 

Read next:  I only recommend borrowing from family as a last resort, but I understand in today's economic climate, taking low (or zero) interest money from family is a viable way to get ahead on your financial goals – like repaying student loans or coming up with the cash to buy a house. With this in mind, check out the following posts for real alternatives to asking “The Bank of Mom and Dad” for cash. 

 

 

 

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    • Cat Alford/ Budget Blonde
    • April 6, 2016
    Reply

    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.

    1. Reply

      Makes things so much easier.

  1. 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.

    1. Reply

      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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    • March 6, 2016
    Reply

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  2. Reply

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

    • Lisa E. @ Lisa Vs. The Loans
    • February 15, 2014
    Reply

    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
    Reply

    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.

    • Danielle
    • February 10, 2014
    Reply

    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
    Reply

    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.

  3. Reply

    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!

    • Stefanie @ The Broke and Beautiful Life
    • February 9, 2014
    Reply

    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
      Reply

      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
    Reply

    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
      Reply

      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
    Reply

    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)

    • Leah
    • February 7, 2014
    Reply

    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!!!

  4. Reply

    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. 🙂

    • Mrs PoP
    • February 7, 2014
    Reply

    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!

    • Blake @ BeanCounterByDay
    • February 7, 2014
    Reply

    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
    Reply

    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
    Reply

    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
    Reply

    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
    Reply

    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.

    • Sara
    • February 7, 2014
    Reply

    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.

  5. Reply

    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.

  6. Reply

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

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