Need to ask your parents for a big chunk of money? Do this first

Intergenerational wealth transfer has become a massive theme as older generations look to modern ways of putting their estate to work before they pass away.

The rationale makes so much sense; they’d like to see their children and grandchildren’s lives get better right now. It’s also helpful to their estate, from a tax point of view, in many cases.

But is it ever OK to outright ask your parents for financial help?

If you need it, and have a solid plan for it, you should ask. Be prepared that the answer could be no, maybe, sometimes, or conditional upon a need your parents have (also known as strings attached).

Don’t feel weird about needing money

When it comes to finances, millennials do have it rough — and avocado toast and social media scrolling aren’t the problem.

Living a quality life as a 30-something today is drastically more expensive than a few decades ago. Millennials paid many times more for their post-secondary education and still carry high levels of student debt. We, and, yes, I am a late millennial, graduated into a precarious job market without stable pensions, fewer health benefits and limited job security (millennials notoriously hop from contract to contract).

Purchasing a home on one good income is infeasible (it takes two exceptionally strong incomes, and even that is a stretch nowadays). And, the direct and indirect costs financially and careerwise of taking a leave from work to have a family are staggering, which is why millennials are delaying or skipping having kids.

Insert wicked levels of inflation and high interest rates — if you’re already at the end of your financial rope, these factors might just be the tipping point.

Make peace with where you’re at and get organized to ask for the money you need. You are in control, and this will be OK.

The money you ask for needs a mission

There’s zero chance your parents will offer support if you’re just asking, and there is no plan. In fact, doing that might turn them off the idea completely.

Map out your request carefully, and then go to them.

What is the money for? Support with child care? To assist with a down payment? To consolidate debts? To tide you through a period of unemployment? To go back to school? To buy the groceries you need? To contribute to your wedding? To launch your business?

How much do you need, and by when? Don’t be surprised if your parents ask to see your math. They can offer insights based on their experiences, give you suggestions, and they might also push back a bit to suit their financial situation, too. The goal is to keep the communication respectful, and focused on your pressing needs.

Are you offering anything in return? It’s OK if you’re not, but be clear. They might wonder if they get to be registered on the title of the house you’re buying or as a shareholder in the business you’re starting.

My pro tip here is that you may want to offer to them a commitment to improve your own financial literacy as a condition of accepting the funds; reading books on investing and budgeting, working with a business coach, or registering for a program that teaches financial literacy. They will be relieved to know that you’ve got this whole money area of your life handled.

Plan for the time they need

Most parents will need time to review your request, possibly meet with their financial planner, and organize funds for you, if they decide to move forward. Work this back into your planning. In other words, be as proactive with your request as possible.

Get your paperwork sorted

Depending on the amount of money, and what it’s for, you may have paperwork. For example, if the money is for a down payment, you need a letter written specifically for the bank saying that the money is a gift. If this is a loan your parents are extending, draw up an agreement that states how much the loan value is, the interest rate, the repayment terms, who will keep track, and any other conditions. If investments are being transferred, there will be paperwork amongst the financial institutions doing the transfer. For larger sums, a bank draft might be required and it can be helpful to go to the bank together to make the deposit. If the money is a smaller sum, your parents might just be able to e-transfer you the funds.

The biggest gift you can give back to your parents is showing them you’ve done something important and meaningful with the money that has made your life better. Share some of these benefits along the way, and consider doing the same thing for your own kids, if you have them. If your parents simply can’t help, that’s OK, too. It just means you need to make another plan to raise the money you need; so turn your focus to that.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.