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How to help your parents financially — without going broke

One in five Millennials provide financial support to their parents, often by putting their own finances at risk. If you can afford to help your parents financially, here's the right way to go about it.

The media makes it seem like all Millennials mooch off their parents. But an increasing number of families are finding themselves in the opposite situation. A study found that one in five Millennials help support their aging parents.

And we’re not talking about loaning some money for dinner here and there. The study found these Millennials are giving their parents an average of $18,250 per year.

Yeah … I know … I didn’t believe the number at first either. I read the study a few times to make sure I had it right.

I assumed medical bills were to blame, but the study found that nearly three quarters of the financial aid goes towards general living expenses like food and housing. I get that — I wouldn’t let my parents starve or live on the streets (or move in with me for that matter).

Half of those giving their parents money were shocked to find out just how much money their parents needed. We naturally assume our parents have saved enough for retirement. But many didn’t, or lost a lot of it during the recession.

On average, the young adults who find themselves taking care of mom and dad carry $63,000 of their own personal debt:

  • They owed an average of $40,000 towards their mortgages
  • They carry an average of $16,000 in student loans
  • They owe $6,000 in other forms of non-mortgage debt like credit cards

Helping out their parents also stops these people from fulfilling their own dreams. Because of the money they’re loaning (or giving) away:

  • 39% of Millennials have delayed saving money for retirement
  • 48% have delayed buying a home
  • 38% have delayed having children
  • 29% have put off marriage

Uh oh.

If these people keep putting those things off, especially saving for retirement and buying a home, they may find themselves needing financial help when they’re old too. Only they may not have children to borrow from.

Want to know the weirdest part of this whole thing?

Only about half of the people supporting their parents have even talked to them about what’s going on!

That’s right. Everyone involved — the parents and the children — are so uncomfortable about the situation that they’d prefer not to talk about it at all.

Why are they avoiding the conversations?

  • 21% said they feel guilty bringing it up.
  • 17% said their parents are sick, and they don’t want to add to their ill health by having an uncomfortable talk.
  • 17% said it’s just too weird to talk about.

I get that.

When you reach a certain age, you become aware of everything your parents did for you during your childhood. And you’ll do anything to help them during their time of need.

But you need to think about yourself, and your old age, too.

If you’re supporting your parents (or think you may have to one day), you may have some questions about how to deal with sticky situations that pop up. So we asked an expert for some advice:

Can you dictate how your parents spend the money you give them?

Let’s say you give your mom a few hundred dollars. Because you feel weird about it, you don’t ask her what she plans to spend the money on and just assume it’s for housing or food. Then you overhear her telling your Aunt Mary she lost ten dollars at Bingo the other night. Should you pipe up and say, “What the hell, mom?”

“You have a right to know what your parents are doing with the loan to a certain extent,” says Jorie Scholnik, an Etiquette Associate and Professor at Santa Fe College.

Before any money is loaned, there should be clear expectations about the frequency and amount of the contribution. That could be a time to also talk about how the money is going to be spent. As long as the money is going toward needs, you have to accept that you loaned the money and it is now in your parents’ hands. If you see that irresponsible purchases are being made, you can clarify your expectations for lending the money.

That means you have to talk to them about the money before you give it to them, and regularly thereafter.

Yes, it’s awkward. But if you don’t want to get angry and potentially ruin your relationship with your parents forever, ten minutes of awkwardness will be worth it.

Should your siblings have to chip in, even if your parents only asked you?

“If your siblings are in a position where they can afford to contribute and they have a good relationship with your parents too, then yes,” says Jorie.

Remember that it’s not just the siblings who should be involved in any discussions about your parents’ financial situation. Significant others are part of this too.

“A lot of resentment can form between siblings and even the siblings’ spouses if only one child contributes and the others have the means,” Jorie says.

If a sibling is just as broke as your parents, he/she can help in other ways. “They can take care of the lawn or run errands,” Jorie says.

Should you make a plan for repayment, even if it’s unlikely?

“You can make a plan to repay the loan, but go into the situation knowing that you may not get back any money that you loan,” Jorie says. “Consider this money gone when you loan it to your parents.”

As with any loan, don’t give them more than you can afford. And don’t put off saving for your old age entirely just to help your parents during their golden years.

Your parents will understand. “In general, parents don’t want to put their children in a position where they are struggling financially,” Jorie says.

Instead, help them develop or revise a budget.

Talk to them about moving to more affordable housing or renegotiating their debt. If worse comes to worst, bankruptcy may be a smart move for older adults with lots of debt.

These conversations aren’t easy or fun. Voices will likely be raised. But if you don’t want to be in their situation when you’re their age, these are must-have conversations.

Summary

  • One in five millennials financially supports one parent or both parents.
  • Most of these millennials are putting their own financial health at risk to do so.
  • Almost half of all financial supporters haven’t spoken to their parents about the reasons they’re in need of money, or where the money is going.
  • Experts recommend talking about where the money is going, if it will be repaid, and how all family members can contribute to the parents’ well-being.

If you’re supporting your parents, or are concerned you might have to in the future, it’s important to start with clear communication. The conversations can be awkward, but they can save you and your family money, time, and the health of your relationships.

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