WSJ’s Personal Finance team presents a series on how to fix your financial life in 2024. Up now: asking for money
Hitting your parents up for cash as an adult can be awkward. But sometimes the best money move is to ask for help.
Take comfort that you aren’t the only one asking. About 68% of parents of adult children have made or are currently making a financial sacrifice to help their kids financially, according to a recent Bankrate survey. And 38% of home buyers under age 30 received help with the down payment from their parents, according to a survey this spring by Redfin.
Alex Redelico and Dean De Luna recently asked their parents, extended family and friends for cash gifts for their son Benizio’s first birthday.
“It’s becoming much less taboo to say, ‘Please give us money,’” Redelico said. Her mom gave cash. Dean’s parents did too, plus they opened and seeded a new custodial account for Benizio.
There is an art to asking for help, however.
Success depends on your parents’ financial situation and how you frame the question, financial advisers said. You also need to earn their trust. Saying you need help achieving a big financial milestone while you are flaunting your spending on social media will probably cause your parents to balk.
“It can be a difficult conversation if you’re planning a ski trip to Park City and then you ask your parents for down payment money,” said Michael Liersch, head of advice and planning for Wells Fargo.
Here are six points to consider when you make your request:
Can your parents afford it?
The high prices and interest rates prompting your need for financial help are also a strain on your parents. Ask them to triple check their budget to make sure they can afford to give you money without harming their own financial future, said Liersch.
Even when parents are relatively well off, they might be reluctant.
“They may harbor fears for their own well-being as they age, wanting to avoid at all costs ending up like a latter-day King Lear, begging for their ungrateful children to pay their nursing-home bills,” said Richard Shell, a professor at the Wharton School of the University of Pennsylvania who teaches negotiation.
Have your own house in order
The bigger the ask, the more questions your parents will have. This is particularly crucial to know if you are asking for help with a down payment on a home.
So, be ready to answer questions without getting defensive and do your homework. Some lenders will require your parents’ bank statements in order for them to give you money for a down payment.
As for your parents, they may want to see your budget or hear about the steps you have taken to reduce your spending, such as cooking at home more frequently. Make sure to share any progress you have already made toward your goal.
Lastly, make it clear that you are looking for your parents’ help rather than asking them to do it for you, said Liersch.
Perhaps you saved $15,000 toward a down payment. You might ask if your parents are willing to match that amount.
Let them set the terms
Ask your parents for a meeting to have a financial discussion. Don’t bring this up spontaneously or casually, said Arne Boudewyn, co-founder at Insights Squared Consulting Group, a family-wealth consulting company.
Let your parents take the lead on the timetable and ask them about their expectations or misgivings.
It is best to get any such feelings out in the open right away than wait for some unexpected series of overnight visits, unwelcome parenting advice, or lectures on how you should be spending in the future, said Laura Fredricks, a lawyer who teaches classes on negotiation.
If you have siblings, realize your parents might wish to create written documentation for the gift and update their estate plans accordingly to make things more fair or equal, as they see them, said Valerie Galinskaya, the head of Merrill Center for Family Wealth. They may also wish to have a conversation with your siblings now about the gift to avoid family secrets and reduce potential tension after they are gone, she said.
Tax rules for gifts can be complicated, but unless it is a big gift, there is nothing for the giver to worry about. Recipients generally don’t owe income taxes on gifts.
An individual can give an unlimited number of people gifts up to $17,000 each for 2023 with no federal gift or estate-tax consequences. That jumps to $18,000 for 2024. Givers must report larger gifts on a federal gift-tax return, but there is no tax due until lifetime gifts exceed $12.92 million ($13.61 million for 2024).
Special rules for college 529 plans let givers front-load five years worth of annual gifts into these accounts. And in some states, givers can take a state income-tax deduction for gifts made to a 529 plan.
Payments of someone’s tuition or large medical bills aren’t subject to gift tax, as long as the payments are made directly to the school or care provider.
Show your gratitude
Thank you notes, pictures and nonmonetary expressions of gratitude (such as an invitation to the new home) are important.
A text, email or verbal thank you is fine, but nothing beats a handwritten, mailed letter outlining how grateful you are, said Wells Fargo’s Liersch.
Be prepared to hear no
If your request is denied, accept it and move on.
Your parents feel giving you the money isn’t fair to your siblings. They may want to give you far less than what you asked. Or they just don’t want to do it.
“Don’t assume you’re entitled to any of your parents’ money just because you’re their child,” Liersch said.