Your mother has just retired and is looking forward to setting up her own food delivery unit that she has always dreamed of. Or perhaps your father wants to have an independent office for his consulting practice. However, they are running short of funds and look to you for financial help.
Should it be an emotional no-brainer and you should help them no matter what? After all, they are your parents and have always been by your side. Or should you weigh the pros and cons before shelling out a few lakhs of rupees? To ease your dilemma, ask yourself these questions before taking a decision to offer financial help.
Are they medically fit?
While it is one thing to be inspired to fulfil your dreams irrespective of age, it is quite another to be physically capable of doing it. After retirement, one is typically beset by medical problems that may hinder one’s ability to function. So assess their health and medical condition, and have a realistic discussion with them.
Ask them about their ability to cope with the physical demands of the venture they want to get into, as well as the number of hours they will be required to put in versus the amount of work they are capable of. It will not only be a waste of effort and money if they set it up only to realise it is beyond their ability to run it. More importantly, it may result in severe disappointment for them.
Will they also require physical assistance?
Before you offer financial help, discuss the project in detail with your parents. Will they only require financing or physical help from you as well? Will they need to hire staffers and be able to do so on their own or will you have to do it for them? If you are to devote time and do the initial legwork for them, you may need to reschedule your work routine. So have clearly defined physical and financial expectations and check whether you can fulfil these.
How much money do they require?
The next important question is, of course, the extent of financial help they require. If they are funding most of it themselves and only need you to finance a fraction of the cost, which you can easily afford, do not hesitate at all. If, however, you are expected to finance the entire project, you could may have to opt for a loan, rope in other siblings to shoulder the financing, or help them liquidate some of their assets to enable partial funding.
What is your financial situation?
Do consider your own financial strength before taking on this responsibility. If you have just acquired a new job and don’t have the wherewithal to finance it, be upfront and tell them, while suggesting other means to finance the project. If you are financially comfortable and can easily write off the amount, go ahead and help them. If, however, you are in dire straits yourself because of the Covid situation and are unable to help them, let them know that too.
Are you looking for repayment?
Be very clear about your expectations from the project. Are you just offering the money without any expectation of returns or profits? Or perhaps you want the amount to be treated as a loan? Then again, maybe you just want to help without any expectations and are treating it as a gift to your parents. In the former two cases, do not hesitate to have a clear written agreement with them.
If you have a wealth whine, write to us...
All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at etwealth@timesgroup.com with ‘Wealth Whines’ as the subject.
Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.
FAQs
Risks to your finances -- and your feelings
Can my parents give me money to start a business? ›
Get It In Writing
If you are loaning money to anyone, always draw up a loan agreement documenting the amount loaned, a fixed repayment schedule and interest rate. While the IRS isn't concerned with small personal loans, if you loan a significant amount of money to your kids you must charge interest.
How do I help my parents with money? ›
Make sure you have a clear agreement about the form of help, such as a loan or gift, and any terms for repayment. If you want to give the person something outright, consider giving them cash, paying one of their bills directly, or providing them with non-cash assistance, like gift cards, or certain resources they need.
How to ask family for money to start a business? ›
How To Ask For Startup Cash From Family (Without Burning Bridges)
- Understand their financial philosophy. ...
- Build trust by showing examples of success. ...
- Listen closely to investor concerns. ...
- Address hesitation points. ...
- Pitch the bigger vision. ...
- Make your ask. ...
- Give a clear timeframe.
Help your parents save money by contributing to the household expenses using your earnings from the part-time job. Offer to put half of your earnings towards expenses for yourself and for maintaining your household.
How much money can be legally given to a family member as a gift? ›
A gift tax is a government tax imposed on those who give money or property to others in exchange for nothing (or less than total value). There is typically a tax-free gift limit to family members until a donation exceeds $15,000 (jumping up to $16,000 in 2022). In these instances, the IRS is usually uninvolved.
How does IRS know you gifted money? ›
The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift. However, form 709 is not the only way the IRS will know about a gift.
Is it OK to help your parents financially? ›
Fight the guilt trip
Or, at least decide how much you can afford to help and contribute only that amount. Helping your parents is a good thing. Enabling bad financial behavior is not. Get some therapy if the pressure is too intense to handle on your own.
Am I obligated to give my parents money? ›
Above all, the decision of whether to give money to your parents should come down to your own financial situation. Consider your capacity to give from two angles: Current means: Giving money to your parents makes sense if you are in a situation that allows you to budget a set amount to send them each month.
Am I financially responsible for my parents? ›
CA Fam Code § 4400 (2018) “Support of Parents” makes adult children responsible for supporting “a parent who is in need and unable to maintain himself or herself by work.” However, the law states that this applies unless “otherwise provided by law.”
A gift is the simplest way to obtain business capital. You have no ongoing obligation to the giver (although you should thank the person and make an effort to maintain good relations). A friend or family member might offer a gift of money to help you get started, or you might jump-start the process by asking.
How do I start a business while supporting my family? ›
How to Run a Business While Raising a Family
- Reliable, flexible child care can allow for more focus on your work despite an unpredictable schedule.
- Block your time to provide specific time for work and family.
- Ask peers, mentors, and other people in your network for their suggestions.
Let's look at some easy ways to do it.
- Put your business on the map. ...
- Open a business checking account and get a business debit card. ...
- Get a business credit card. ...
- Pay yourself a salary. ...
- Separate your receipts and keep them. ...
- Track shared expenses. ...
- Keep track of when you use personal items for business purposes.
Nearly half of US parents provide some kind of financial support to their adult children, who are grappling with higher food and living costs than they did, a new study has found.
Is it worth living with your parents to save money? ›
Pro: You can save up for an emergency fund or down payment
Without that chunk of change, there's little you can do to rent a place on your own. If your goal is to save up to eventually purchase a house, expect to live longer with your parents.
Should I let my child spend their own money? ›
It's good to let your kids have some financial freedom–especially if they're working part-time and have earned a little spending money. But try to keep them relatively reigned in.
Can your parents give you money? ›
Technically speaking, you can give any amount of money you wish as a gift to one or more of your children or any other member of family. Some parents also choose to buy property and put it into their child's / children's name(s).
Can you gift your child a business? ›
Giving your business shares to your children can help you avoid income tax, as this kind of transfer isn't taxed. Unlike selling the business, where the company needs to earn much more than what you actually take home due to double taxation, gifting bypasses this.
Do I pay tax on gift money from parents? ›
Share: Generally, the answer to “do I have to pay taxes on a gift?” is this: the person receiving a gift typically does not have to pay gift tax. The giver, however, will generally file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $17,000 per recipient for 2023.
