Bailing Out Mom and Dad: A How-To

You read that headline right.

Sometimes parents ask their adult children for money, as they struggle with the financial stress of debt, a job loss or the rising cost of retirement living. A 2015 survey by TD Ameritrade found that one in five Millennials and Gen X’ers are supporting their parents.

And for those with elderly parents, 76% of adult children say they are providing them with financial assistance, according to Pew Research.

Even if we’re struggling with our own finances, it can feel impossible to refuse. Our parents likely sacrificed and provided for us in many ways, so, naturally, we can feel obligated to return the favor.

That said, as adult children, the overarching guidelines to follow here aren’t dissimilar to when you may approach your parents for money. It’s important to show respect, ask questions and set forth clear expectations, especially if you feel this could turn into a sticky – or repeat – situation.

And if money is tight for you, don’t hesitate to be honest about your financial limitations and suggest alternatives to giving cash.

Here’s a closer look at how to help a struggling parent in financial need.

Offer Advocacy

More than money, what parents sometimes need is someone to help them find more affordable solutions and maybe even act on their behalf in dealing with creditors and their various financial accounts.

With rapid advances in financial technology and so much information (and misinformation) to consume it can be jarring to master your finances alone – whether you’re trying to find a lower home insurance premium, refinance your mortgage or negotiate medical expenses.

If it’s more money that they truly need, can you…

• Help them downsize and throw a big old yard sale or sell valuables they no longer need online?
• Walk them through websites offering passive income streams via the “sharing economy” (e.g. renting out their tools or an extra bedroom) or help them find local side gigs like running errands for neighbors?
• Update their resume and source specific hiring managers online that they can directly engage with, rather than blindly adding their resume

If you consider yourself a savvy consumer (and I know you do) some ways to help them reduce expenses to shore up cash include:

• Calling lenders on their behalf to negotiate and refinance their debt.
• Helping them shop around for better insurance rates online.
• Reviewing their monthly expenses and identifying various money leaks they can plug. (Do they really need cable?)

Serving as an advocate for them – which costs nothing more than time and thought and taking advantage of modern tools – could be life-changing for your parents.

Suggest Third-Party Help

If your parents’ finances are too complex, consider tapping professional help. As their advocate, suggest credit and debt counseling resources like the National Foundation for Credit Counseling or Money Management International if they’re behind on paying bills and grappling debt (with what seems like no end in sight.)  The first meeting is free.

For help understanding medical bills and even disputing health care costs, visit the Medical Billing Advocates of America.

Lastly, the government offers subsidies and programs for those needing financial assistance. At Benefits.gov, you and your parents can find and apply for a list of support programs related to housing, insurance, living assistance and more.

Loop in Your Sibling(s)

If you have siblings, even if they’re not financially stable, it’s important to engage them in the conversation and let them know that mom and dad need financial help. While siblings may not be able to offer money, they may know of solutions and provide other meaningful resources such as their time. For example, they may be able to move in with your parents and substitute as a home health aide for a time frame to eliminate the added expense.

If you can, as a family unity, pool together money to help your parents, all the better and less stressful for you. But a serious conversation must be had, one that doesn’t create misunderstandings between you and your brother or sister down the road. Does each sibling understand that the money is a gift (not a loan)? Is each sibling fine with how their parents will use their money?

Discuss With your S.O.

If married or in a serious relationship, discuss the implications that supporting your parents may have on your finances as a couple.

How might this challenge your savings goals now and in the future? What if your significant other’s parents will need financial help down the road, too? Will there be enough money to go around? It may be helpful to start a savings account just for the chance that you’ll need to help out a parent (on either side) again down the road.

For Repeat Requesters, Discuss Permanent Solutions

If this isn’t the first time your parents have turned to your financial help – and you feel this could become a habit – have a conversation about expectations (yours and theirs) and rather than just give money the next time, talk about ways to end the cycle once and for all.

Can you find ways to significantly pare down their expenses? Should they consider selling their home and live in a more affordable place? Would it be possible to have them live with you for a time period? If their debt is really dire and credit counseling hasn’t quite worked, perhaps it’s time to speak with a bankruptcy attorney.

You may also want to can identify a necessary expense that you can affordably take over indefinitely for them -– like utilities or food costs -– to help lighten their financial load.  A friend of mine helped her mom pay her rent for a year until she was able to find a cheaper place to live with a roommate.  In a case like this, I suggest paying for these expenses directly, as opposed to just handing over cash or a check, to ensure that need is definitely met. And be sure to check in with your parents weekly to review their cash flow and be sure they’re committed to saving, too.

 

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at Farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.