The right way to ask your family for money

 

So many of us have been in this situation – you’ve got a big expense coming up and you’d love some financial support from your family. Maybe you’re ready for that first house or due to get married and a little help from a loved one would make all the difference. And as uncomfortable as the thought makes you feel, asking your family for money might be the responsible thing to do.  

The good news is that asking family for help doesn’t have to be an awkward affair. Remember, they are likely looking forward to supporting you the best they can. In fact, in a recent study we carried out on family finances, we discovered that 58% of over 75’s actually enjoy helping out financially. Keep reading to find out how to ask family for money in a way that puts a clear case forward and gets loved ones to jump in and help. 

But first, what if you don’t really need the extra help? 

Borrowing money from family might not be necessary 

You’re probably thinking your budget doesn’t stretch any further. But it might not even have to. Before asking a family member for a loan or a money gift, check your spending habits and look for costs you can cut back on. If you’re not pressed for time, consider saving a set amount each month, or look for ways to earn extra money. Even if you do end up asking family for financial help, you’ll have peace of mind knowing that you’ve looked at all the options. And, who knows, maybe you’ll realise you don’t even need as much money as you initially thought. 

How to ask family for money: top questions to address 

Start by choosing the right moment and place so you can have a productive conversation in a setting with no immediate interruptions in sight. Once you’ve settled in, here are the top things to address when asking for financial help from family: 

Why you need the money 

Even if your family member has the ability and willingness to help, you still need to make a good case for why you need their financial assistance. In our survey, we discovered that the biggest reason financial gifts were offered and received were weddings, with other popular reasons including assistance with living costs and to help clear debts.  

When broaching the subject, be prepared, honest and clear. Bring in the numbercrunching sheet you’ve worked out and any other documents you think are relevant. But above all, be open and let them know exactly what you need money for and why your current budget isn’t able to cope. This will help your family understand your situation better and offer their best solution. 

How much money you need 

Asking family for money might get trickier if you’ve already asked them for help, but then realised later on it wasn’t enough. This is why it’s always a good idea not only to come up with an exact amount of money, but the right amount as well. Don’t be tempted to ask for more than you need just to be on the safe side. Instead, mention that the amount you need is based on current circumstances, and ask whether you’ll be able to have another conversation if things change in the future. Your family will likely be flexible and even appreciate your forward thinking. 

How will you give it back 

If you’re asking a family member for a loan instead of a gift, think of how you will be able to give it back. Consider repayment terms, including interest rate, as well as a timeline you’ll be comfortable with. Coming up with a repayment plan will often make the conversation with your family smoother and they’ll be grateful you’re making life easy by suggesting a solution. If you need inspiration, we’ve put together an easy guide to working out conditions for a family loan. 

Don’t forget to offer your family time to think things over, even if they’re eager to help. If you’re asking for a substantial sum, consider getting expert advice as well. A financial adviser will be able to guide you and your family through the process, while offering peace of mind for everyone involved. 

What happens if you’re not able to repay the loan, or meet the conditions 

Unexpected events do happen and circumstances can change. Be open with your family and discuss what you should do if you find yourself unable to cope in the future. Remember your family is there to help you, so have an honest conversation about the concerns you may have. It’s likely they’ll share the same ones, so addressing them out in the open, at the very beginning, sets the whole process of borrowing money from family up for success. 

Top 4 tips when asking family for money 

A successful conversation about money does rely on a bit of preparation beforehand. Here are a few things to consider before sitting down with loved ones for the big chat: 

1. Know the pros and cons of asking a family member for financial help 

You might be looking forward to the low interest rate from a family loan, but are you ready for the strain a money agreement might put on your relationship? Here are a few advantages and disadvantages to mixing family and money, but make sure you add your own to the list: 

The pros of getting a family loan: 

  • Low or no interest rate 
  • Flexible terms and repayment schedule 
  • Quick financial help 

The cons of asking family for money: 

  • The uncomfortable conversation 
  • It might put a strain on your relationship 
  • Missed opportunity to build up your credit score 

2. Choose the family member wisely

Who you’re asking for help is a crucial part of the decision. Make sure it’s someone you’re in a good relationship with and, most importantly, that they’re in a good financial position themselves. Oftentimes what makes the conversation awkward is not that you’re asking for money, but that you’re asking the wrong person. So be mindful of their financial security as much as you are of your own. 

3. Talk to an adviser 

There are other reasons, beyond a potential awkward conversation, that make borrowing money from family difficult. Did you know that money gifts can come with hefty tax bills too? Or that your family can do more harm than good by offering to help more than they can afford to?  

Since most of us are unlikely to talk about money with our families on a recurring basis, we might not have enough experience to keep ourselves and our loved ones out of trouble. This is why asking for expert help is one of the best ways to keep potential financial or legal problems at bay. Plus, you and everyone in the family will feel safe knowing that you’ve found the best possible solution, while keeping your financial positions secure. 

If you want to find out more about the tax that may apply to the money gift from your family, our inheritance tax guide answers some of the most common questions. 

4. Keep notes 

Whether it’s a money gift that comes with certain conditions, or a loan with specific repayment terms, make sure you capture in writing all the responsibilities that come with the financial help from your family. This way you can avoid misunderstandings, while having a document both you and your family can go back to if necessary.  

Next, read our handy article on Cash Gifts from Parents where we go through all the reasons why it’s often considered a difficult conversation and how you can make it easier for you and your family. 


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