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Helping Your Parents With Their Finances

Written by Laura Martinez - 13 Comments

Unless you’re careful, mixing family and finances can be a recipe for trouble. For example, lending money to family members is a great way to ruin relationships.

Another challenging area is when your parents find themselves in a financial mess, and you feel compelled to step in and offer guidance. How do you help with a nest egg that got hammered over the past year? What can you do if they have a free-spending lifestyle that’s resulted in a huge amount of debt late in life?

The first step is deciding whether or not to intervene. Once you’ve decided to offer your assistance, here are some tips for helping without creating problems.

Arrange a meeting with a Certified Financial Planner

Hiring a financial planner can be a great stress reliever for both you and your parents. Just be sure it’s a fee-only planner so everyone’s interests are aligned. Involving a CGP can be a great option for a couple of reasons.

First, this is a neutral person to whom your parents can explain their situation in detail. It’s natural for parents to hold back important information from their children for fear of embarrassment or judgement.

Second, by doing some research through the National Association of Personal Financial Advisors, you can find someone with the specific experience your parents need to get back on the right track. Just be sure to talk to them first to make sure they’re right for the situation.

One way of bringing it up would be to mention to your parents that you’re thinking of having an expert take a look at your own finances. You can then give them the name and number of a planner.

How to talk with your parents about their finances

If your parents don’t want to go to financial advisor, but still need help with their finances, you may have to work with them yourself. Here are a few tips for handling what might turn out to be an awkward conversation.

Handle with care

Put yourself in your parents shoes before you say anything. How would you like for this conversation to start if the roles were reversed?

Be realistic with your advice

Don’t assume that your parents will change decades worth of bad habits overnight. Instead, I would recommend focusing on one area at a time.

Prioritize helping with their finances

Depending on how willing they are to accept help, identify the areas in which they are most in need of assistance. Here are some ideas:

  • Budgeting. This is a great way to simplify your parents’ life. Show them how to automate their finances and set aside money in their savings account for an emergency fund, vacation, etc.
  • Eliminating high interest debt. Work with them to create a debt snowball to reduce and eliminate their credit card or other high interest debt.
  • Retirement. If they haven’t yet reached retirement age, make sure that they’re at least investing enough in their 401k to get their employer’s match. If their budget will support it, you should also explain to them the benefits of traditional and Roth IRAs.

Don’t forget about estate planning

Ask them if they have a will and power of attorney. Remind them that you want to respect their wishes, and explain that these documents will allow that to happen.

Preserve the relationship

The ultimate goal here is to encourage and guide your parents with their finances, but they have to be willing to make the changes necessary. Simply lending (or giving) them money will only make a bad situation worse, and can jeopardize both your finances and theirs.

Whatever you do, be sure to preserve your parents’ dignity, keep your own finances firm, and maintain your relationship.

Published on June 23rd, 2009 - 13 Comments
Filed under: Miscellany

About the author: helps families achieve financial freedom by sharing tips for reducing debt and building freelance income over at Couple Money.

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13 Responses to “Helping Your Parents With Their Finances”

  1. 1
    Neal@Wealth Pilgrim Says:

    This is a crucial subject and I’m glad you wrote this post.

    My experience is that both the kids and the parents are often terrified of having this conversation.

    The best conversation starter I’ve ever seen…is the truth.

    “Hey Mom & Dad….I’m really afraid of having this conversation but…….”

  2. 2
    Rosa Says:

    Wow, what a big topic! I’m really interested to see what people have to say – thank you for bringing this up.

  3. 3
    MoneyEnergy Says:

    Great topic to bring up. Along with respecting parents’ wishes is just the simple fact of not being too pushy with anything, either. If you’re in a family of people with strong opinions and/or stubbornness:) then both sides might either be too pushy or too stubborn on a certain point. A more subtle approach might work better here. Be clear and honest, but know when to step away if it looks like you’re just getting in the way. Time might do the rest of the work for you. So definitely preserve the relationship, that’s the most important piece here, I think.

  4. 4
    Madame X Says:

    Excellent advice. I’ve been dealing with all this with my own parents over the past year and it is tough. It’s sad when people want to just relax and enjoy retirement and then the lightbulb goes off that their money won’t last long enough…

    I think another key thing to keep in mind is to keep reassuring your parents that it’s about them, not you. If they have any assets that you might inherit, make sure they know you’re focused on how they’ll cover their expenses to live comfortably, not on whether there will be anything left after they die!

    Also, educate yourself about Medicare and Medicaid. It’s pretty complicated but very important to know what’s covered and what isn’t when it comes to nursing homes, etc.
    One of my series of posts on this topic is here.

  5. 5
    Laura Says:

    Thanks for your feedback. I’ve heard some people feeling squeezed by their parents. It’s a touchy situation.

    @Madame X; You bring up a good point about learning more Medicare.

  6. 6
    BSimple Says:

    Speaking to your parents about their finances is not always the easiest topic to bring. As they get older its gets tougher and tougher. Another solution would be to possible set up a Rev Trust which would enable someone to step in to manage their finances once they are unable to. Its not the cheapest solution but a way to help them as they get older.

  7. 7
    financial planner Says:

    Our firm matches individuals to wealth advisors, so we talk to investors and advisors about this subject often. This is difficult even for financial advisors to teach their clients to bring up finances with other family members. However, it is one of the most important things you can do because it saves much more difficult conversations later when something goes wrong.

  8. 8
    DDFD at DivorcedDadFrugalDad Says:

    Solid post. Family and money can be like oil and water!

  9. 9
    Macy Says:

    The feeling of having obligation to parents pulls children to that difficult situation. Definitely, kids need intelligent advice such as this. And you brought up the topic well. Thanks!

  10. 10
    Pro2Pro Network Says:

    Interesting topic! Every child should be able to understand their parents’ needs and the best way to resolve the problem. Every family is different, but no one should know your parents better than you! I would gladly assist my parents and I know they would allow me to, if they really needed it.

  11. 11
    Melissa Says:

    I just had my mother ask me for $800 a month to replace her workers compensation that is ending. She has gotten herself in a bad situation financially, and through the years I have tried to steer her into better decisions but it just isn’t happening. Now she’s in a hole and every suggestion I make gets met with negativity, and it seems she just wants to coast (she has said before she shouldn’t have to work). I am SO frustrated! She cries and puts the guilt on me, why won’t I help her (I say I AM trying to help her, I have offered to pay for certain things to be done to get her back on her feet and pointed in the right direction but she refuses, she just wants money in the bank). And just because I am married to someone who makes a good bit of money doesn’t mean I’m a savings and loan, you know?? Ever since we married, family (and _EX_ family) has hit me up for cash. I helped here and there in a limited way in a few cases, but earlier this year I drew the line and said no more. Now this. Grrr!

  12. 12
    no name please Says:

    My parents where getting evicted from there home, they asked my husband and I if we would help them out. We wound up buying a house together. We both have separate areas, but this doesn’t help. Mixing family and money together is the worse thing someone can do. I still believe there are a small handful of families who can pull this off, but most families will wind up with a lot of hard feelings. In the end all of my family is going to get hurt from this. Very hard to fix bad feelings between adult children and parents. Wish my parents the best when this is all over with, but can’t wait till the house gets sold.

  13. 13
    Deedub Says:

    My parents saved very little for retirement. My mom owns a hair salon and is 66 years old. My dad recently got sick and will not be able to work ever again (he is 59). They are scraping by on my mother’s business, but I don’t know how much longer she’ll be able to work. They are not very smart about money. I am a little better, but certainly not a wealth of knowledge. I know I need to look into all their finances and make sure they are getting all the benefits they can from the govt, but I really have little idea of how to do this and if there are things I’m not thinking of. I just don’t want to end up using my savings on their retirement!

    Does anyone have any recommendations for websites or books that can help me get started?

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