What do you do when you have financially struggling parents? How do you help without falling through a dark hole with no end in sight? What to do with aging parents who have no money? How do you cope when your parents keep borrowing money from you? In this article, we will help you build a great plan to deal with all those problems.
For over 29 – 39% of millennial in America, the realities of saving for their retirement looks bleak. The future they can only see is saving or instead of earning to keep their parents afloat.
It’s even worse within the age groups 56 – 74 where over 45% of baby boomers have nothing saved for retirement. Over one-third of this group, between 67- 72, are also postponing their retirement because of their financial situations.
However, we are not here to talk about the cause of these events, but to focus on who bears the cross of it all – the child who sees nothing else but the path to help them their parents. It’s even more difficult as you are also bearing the weight of student loans, trying to fund your own retirement plans, and dealing with wage stagnation.
The good news is that there is hope.
Let’s look at some steps you can take to structure your life and help your parents without becoming overwhelmed.
Step 1 – Make peace with it
Before anything else, you must make peace with your reality. There will always be that moment where you feel as though it should have happened differently. I’ve heard different narratives about helping your parents.
Some people around you might criticize doing it because, according to them, you didn’t choose to be born, so your parents shouldn’t place that on you. Others would tell you how much you should be ‘grateful” you have people around you. Bear in mind that it’s your choice to help or not to help. Never allow guilt control how you do help (or not help).
Whatever the circumstances, you must let go of the bitterness and resentment. We do understand how much it would feel as though you are throwing money into a black hole. Some times you might feel hatred or despair, but you must never give up on yourself.
The reason you have to make peace with it is for yourself and no one else. When you are positive about your life, you will be able to find logical steps to overcome problems. Even if it takes some time or a few years, it’s much better dealing with it from a happy mindset than anything else.
Step 2 – Help them build a better money management plan
The way you manage your money would altogether affect how much you can be able to let go of for your parents. You need to get a better handle on your own finances before you can help any other person. It’s also important to never put your finances at risk in other to help anyone.
Get a proper money management plan in place, as it’s vital to help understand how much you can safely set apart for your parents. It would also help you remove unnecessary expenses and stay within your limit.
Step 3 – Talk to your siblings.
If you have siblings, then you should talk to them about getting involved in helping your parents. As a team effort, it would ease the burden off your shoulders. However, be open to the fact that your siblings might not be open to help.
But talking to them can also help you uncover the information you didn’t have about your parent’s finances. Overall, talk to your siblings about joining you before talking to your parents.
Step 4 – Assess their financial situation
Talk to your parents about their finances. Help them understand your concerns and how you wish to help without placing yourself in a dire state. It’s important to realize that your goal is to understand everything about their finances, so you can build a plan together with them on how to deal with debts or plan for the future.
A clear picture will help you understand what they owe, people owning them, mortgages, medical bills, credit cards, and other loans. Concerning their debt, you will have to make a plan on what’s most pressing.
In everything you do, make sure you reassure them that you aren’t there to judge but to help them get to a better handle on their finances.
Step 5 – Make a plan together
As said in step 4, help them formulate a plan. This money management plan should include the methods of paying back debts. You should also think about how much you can allocate from your monthly income to cover some of their expenses. These expenses might include prescription medications, potential medical emergencies, upcoming surgeries, groceries, night outs.
You must understand that your parents are obligated to keep you in the loop on how they spend money when you are helping out. Be gentle about letting them know this as it is entirely for their benefits and yours.
For instance, what if your parents might be indiscriminately spending money otherwise saved for future emergencies. However, you should also be patient with them while helping them stick to a plan.
Bear in mind that you can also consider helping your parents look for more ways to earn money. There are situations where there’s no way around this.
Step 4 – Keep your spouse in the loop
No matter how much you want to help your parents, your spouse must have a say if they are comfortable with it, then its okay to go ahead.
If not, then the answer is no. Take time to have a clear conversation with your family about the circumstances and how much you can or cannot help. Never try to hide these kinds of transaction from your spouse.
If you and your spouse are helping families on both sides, it’s essential to treat everyone equally.
If there’s a family whose addictions or excessive spending might be an issue, it’s vital to state clear limits on how much you can help. This help should be geared towards assisting them in seeking medical help. Never enable addictive behavior.
Step 5 – Set limits
When you are dealing with your own debts or expenses, it’s easier to keep track of what you do. With others, you need to be extra strict about the limits. You need monthly limits as well as when you plan on doing away with debt repayments.
Also, help them understand that they must be diligent with the money you give them. Make them realize that you can’t offer more to their needs than you are already doing.
Money isn’t the only way to help financially struggling parents.
There are many other ways you can support your parents that would make a difference. For instance, you can help them downsize their home needs to something more affordable. You can also help them move to a city with a lower cost of living or have them move in with you.
This can be beneficial if they are also dealing with particular health ailments. However, make sure you’ve compared how it might impact on your personal life before making that move.
If you are very handy, you can also help your parents with the repairs around the house, their car or other things they would have paid someone else. As long as this does not affect your other engagements, it’s okay to help out sometimes.
Be realistic about the future
How old are your parents? Sometimes what makes the difference is starting young. If your parents are currently struggling to get you through school, then it’s okay to assume that their retirement plans are in shambles.
This means you can start putting away all the nickles and dimes that can help out in the future. Even if they actually have sometimes kept aside, it’s always safe to have something extra even for yourself.
However, these emergency funds can help, especially in occasions of medical emergencies, which can happen at any time. Emergency funds can provide a cushion against those unplanned expenses that would have otherwise drowned your finances.
You can keep these funds in a money market account or an interest-bearing account, so it’s easy to pull out when needed.
Avoid these pitfalls
Why helping your parents, you might be tempted to go overboard. Sometimes it’s not entirely as obvious. Therefore, here are some of those scenarios you should avoid:
If you are not sure about how you can pay any loan on your own, then you have no business cosigning that loan. Be sure you can pay on your own before doing so. If they default, you may have to not only pay the loan but the fees, which is a very popular event.
Loaning what you can’t let go of:
If your parents ask for a loan, it’s better to give with the belief that you won’t get it back. This prevents unpleasant events in the future. Therefore, you shouldn’t give what you can’t afford to do without.
Your parents might want to add you as a co-owner to a current deed. Ensure you understand what it takes as the portion you own will be treated as a gift and taxable to them, whenever you sell to yourself, it becomes taxable to you.
Becoming the guarantor of your parent’s medical bill:
Some states have rules about “filial responsibility,” which forces you to support your financially struggling parents. However, when filling out admission requirements, make sure you don’t sign as a guarantor, except that’s your intent. When you do, you will be responsible for the final cost of their care.
Money is never an easy subject, especially when its financially struggling parents. Usually, the first instinct is to give money when you hear about their predicament. Avoid taking this approach; it’s often better to first understand their finances before doing anything. That way, you can make a concrete plan of helping without overextending yourself.
There are times when giving your parents money might actually hurt them. For instance, your parents might have a shopping or gambling addiction. Because you don’t want to be in the same situation as they are.
Even more, you don’t want to be placed in the position of enabling that behavior. It’s okay to help when its about a lost job or being sick. If its’ other circumstances, then you should refer then to seek help and stay strict with your decisions not to help.
Your financially struggling parents should never drag you into debt. It’s better to avoid those situations by building a robust financial plan not just for yourself but for them.
It’s also never easy to help your parents. Although many people may have their opinions about it, it’s all about you in the end.
Build a healthy plan towards helping them and ensure that you can do so without drowning yourself in debt.
Nevertheless, if bad habits cause your parents debt, you are better off referring them for help than giving them money.
The bottom line is that it’s usually better to begin planning, especially around when your parents are still supporting you or working. Such a long term plan can help prevent getting overwhelmed by your parent’s needs when it’s time to help. In reality, you should do this whether they have a retirement plan or not. In the end, it’s still your money, and there’s no harm in building good savings.