When Your Parents Need Help with Money
By Timothy Gower
- PUBLISHED October 30
- 6 MINUTE READ
Your parents may have bought you your first piggy bank and taught you to save your pennies, but unfortunately that doesn’t guarantee that they were planning their finances to meet their own future needs.
In fact, many adult children find themselves experiencing a reversal of roles: One survey found that about one-third of adults who had a living parent or parents age 65 or older said they had given them money to pay bills and cover other costs in the past year. Among those supporting their parents, 72% of respondents said the assistance was for ongoing expenses.
Another poll found that more than three-quarters of adult children in the United States say they bear at least some responsibility for helping aging parents who are having financial problems. Coping with parents’ financial straits can be particularly challenging for middle-aged adults—the so-called sandwich generation—who are simultaneously supporting their own children. And assisting Mom and Dad can be even more difficult if you have siblings with different ideas about how to help out—or who refuse to do so at all.
Certain strategies, however, can help prevent your parents’ money woes from stirring family strife and draining your savings.
Start Planning—and Saving—Early
If you suspect your parents may one day be short on funds, and you want to help, don’t delay. Budget and put away a small portion of your monthly income, perhaps in a high yield savings account. Then, if an emergency such as an unexpected medical bill arises, you won’t have to scramble to come up with a large sum of money in a hurry.
Assess Their Needs
Have a frank discussion with your parents about their current expenses, and keep the conversation going as their circumstances change over time. This means answering some tough questions about what they want as they age, what you can provide for (and perhaps just as importantly, what you can’t). What happens, for example, when they can no longer care for themselves? Will they move in with you or a sibling? Do they need long-term care insurance?
Get the Full Financial Picture
Take a look at the money your parents receive from Social Security, pensions, investment income, and other sources; and money going out to pay bills and other debts. Do they have a Medicare supplement insurance plan? Compiling all of this information is essential for determining what your parents need.
Cut Costs Where Possible
As you review your parents’ expenses, look for potential savings, large and small. Should they sell the large family home and move to a condo? Are they paying for premium cable channels they never watch?
Form a Concrete Plan
Based on what you have learned about your parents’ finances, decide how much of their shortfall you can afford to cover. Discuss with them what shape your help will take—whether you will take over paying monthly bills or deposit a lump sum into their bank account.
Don’t Go It Alone
If you have siblings, get them involved, if possible. They may not be able to contribute financially, but a brother or sister who lives near your parents can visit often, drive them to medical appointments or cut the lawn—saving the family money on aides, ride services, and landscapers.
Take Advantage of Tax Benefits
Until recently, you could claim parents for whom you provided significant financial support as dependents on your federal taxes. That provision has been suspended, though you may still be eligible for a $500 tax credit. You may also be able to claim certain tax deductions or receive credits if you paid someone to care for an aging parent or covered his or her medical expenses. Check with your tax advisor.
Keep Your Own Financial Goals on Track
In particular, be sure to safeguard your own financial future by contributing regularly to a retirement savings plan, such as an IRA or 401(k). It may take some tough choices about priorities to keep pace with your retirement fund while keeping Mom and Dad out of the red. Could making a few repairs help you get another year out of your aging car? Should you postpone that European vacation? Consulting with a financial advisor can help you balance your new reality.
Timothy Gower is an award-winning journalist whose work has appeared in more than two dozen major magazines and newspapers, including Prevention, Reader’s Digest, Esquire, Men’s Health, and the New York Times. He is also the author or coauthor of a dozen books.