Should I lend money to my child?

Helping your child financially is one of the most natural instincts a parent has. But "should I?" is a fair question — and the answer depends less on whether you can than on how clearly you set it up. Here's a calm way to think it through.

First, a gentle reality check on your own finances

The most important question isn't about your child — it's about you. Lend only what you could afford to lose without it affecting your own security, especially your retirement. It's easy to want to give a child everything, but a loan that quietly erodes your own stability helps no one in the long run. If the amount would stretch you, it's wiser and kinder to offer a smaller sum, or a different kind of support, than to put your own footing at risk.

Loan or gift? Decide on purpose

This is the fork in the road, and it deserves a conscious choice rather than a vague drift. A loan is money you expect back. A gift is money you don't. Both are perfectly valid — what causes pain is when you mean one and your child assumes the other.

Say it plainly: "This is a loan, and here's how I'd like it repaid," or "This is a gift, no repayment expected." Either way, write it down. If the money is helping with a home purchase, the distinction becomes financial as well as emotional — mortgage lenders and the CRA treat the two very differently, and you may need a signed gift letter or loan agreement. Our guide on family down payments: gift or loan explains exactly how that works.

If you decide to lend: do it properly

Choosing to lend doesn't have to feel cold or distrustful. The opposite, in fact — clear terms are what let everyone relax. Agree on:

• The amount and exactly what it's for.
• A repayment schedule you both find realistic.
• Interest, if any — many parents charge none, which is completely fine. If you do, keep it modest and within Canada's legal limits.
• Flexibility for life's surprises, agreed in advance.

Then write it into a short, plain-language agreement and both sign it. This protects your child as much as you: it removes any doubt about what was agreed, and it means you'll never have to send an awkward reminder text. The document remembers, so you don't have to. You can draft one in a few minutes and both sign from your phones.

Why writing it down protects the relationship

It may feel strange to formalise a loan to your own child. But consider the alternative: an unwritten loan relies entirely on two people's memories staying identical for years. They rarely do. One remembers a firm repayment date; the other remembers "whenever you can." That gap is where resentment grows. A signed agreement isn't a sign you distrust your child — it's the thing that keeps trust intact, because nobody has to wonder or re-litigate later.

Canadian courts have seen many family loans unravel precisely because nothing was written down — you can read about real cases where a family loan needed to be in writing. And if you're weighing whether a casual understanding is enough, here's whether a verbal loan agreement is legally binding in Canada.

If you decide not to lend

"No" is a complete and loving answer. You can decline the loan while still offering support — help thinking through a budget, a smaller one-time gift, or simply being honest that it's not something you can do right now. Protecting your own security, and not setting a precedent you can't sustain, is a perfectly good reason. A clear, kind no is far healthier than a reluctant yes that breeds quiet resentment on either side.

The bottom line

Should you lend money to your child? If you can comfortably afford it, you've decided clearly whether it's a loan or a gift, and you're willing to put the terms in writing — then lending can be a real and lasting help. If any of those aren't true, slow down. The decision that protects both your finances and your relationship is always the clear one, written down, made calmly.

This article is general information, not legal advice. For a large or complex loan, consult a licensed professional in your province.