It’s never easy to ask for money from family or friends, no matter what the amount. Taking the time to plan how you're going to do it can make all the difference. Read our quick guide on how to ask for money so you can be sure it’s the right choice for you.
Over the past 12 months, on average 10% of our retirement interest only mortgages were taken out with the main purpose of family gifting. The Institute of Fiscal Studies said parents would provide £17bn in gifts and informal loans during 2023. It’s also been reported that the ‘bank of mum and dad’ is now the ninth biggest mortgage lender, with 84% of parents helping their children either as a gift or a loan. At Hodge, we’ve seen on average, ten percent of our retirement interest only mortgages being taken out with the main purpose of family gifting.
So, if you’re in a position where you feel like you need to ask for money, remember you’re not alone. From one off help with a big expense coming up, like a wedding or a deposit for a house, getting a little help from a loved one could make all the difference. And as uncomfortable as the thought is, asking family for money might be the right choice for you.
The good news is, asking family for help doesn’t have to be an awkward affair. In fact, a 2021study we carried out revealed 58% of over 75s actually enjoy helping out financially. Keep reading to find out how to ask for money from family in a way that puts a clear case forward and leaves both parties feeling comfortable.
But first, what if you don’t really need the extra help?
You’re probably thinking your budget doesn’t stretch any further. But before you ask for money from a family member, whether 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 needing to ask for money, you’ll have peace of mind knowing 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.
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:
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 number–crunching sheet you’ve worked out and any other documents you think are relevant. But be open and let them know exactly what you need money for and why your current budget can’t cope. This will help your family understand your situation better and offer their best solution.
Asking family for money might get trickier if you’ve already asked them for help, but then realised later 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.
When you ask for money from a family member, consider if it will be a gift or a loan, and if it’s a loan, think of how you’ll pay 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.
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. 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.
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:
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:
The cons of asking family for money:
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.
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.
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.
This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at unbiased.co.uk.