How Millennials Should Plan to Help Their Parents Financially
Watching your parents age can be a scary prospect, especially as they get to the point where they will need more help from you. It can be difficult to help your parents out financially if you are struggling with student loans, debt and providing for your own family. It is important to make a plan and communicate with your parents so that you can determine what needs to be done, how much you can do, and have the time to find the resources available to help your parents out.
Talk to Your Parents About Their Retirement
The most important step in knowing how to plan to help your parents is to determine how much help they will need. Your parents may have planned wisely for retirement and have enough coming in that they should be able to cover their living and travel expenses once they have retired. If your parents are frugal and budget well, they should be set for most expenses throughout retirement. Some parents may not be in this situation because they were laid off right before retiring or had to take an early retirement and making ends meet may be more difficult.
If this is the case, you may need to help them create a plan that will help them be able to live within their means and in a more affordable situation. This may mean moving to a lower cost of living area, moving in with family or finding a way to earn money even after they have retired.
Decide What You Can Do
Once you understand your parents’ current situation and their retirement plans, you can begin planning what you need to do to help them. It may be helping them pack up and downsize to something they can afford. It may mean going over their budget with them and helping them see what they need to do to help the money stretch. It may mean that you give generous gifts a few times a year, or that you are available to help with the occasional car repair or home repair. However, this should be done within your current budget limits.
You should not put yourself into debt for your parents and you should be sure to take care of your family’s needs first.
Make a Plan for Later
There will come a point where you will need to step in to help with the finances, not with your money, but to help make sure everything is paid on time. This likely will not happen for several years, but it is good to have the plan in place now so that you are not scrambling to get power of attorney or find the correct account information when your parents can no longer help you do this. Dementia or serious illness may be the times that you need to step up and take over your parents’ finances. Talking it over and setting up the plan will make the transition much easier.
Budget to Be Able to Help
It is important to plan a budget to help your parents. This may mean putting aside money so that you can fly out to help when there is a surgery or medical emergency. It may mean that you plan on having your parents over to dinner with you a few times a week as they get older and that you make time to take them grocery shopping. Setting aside money now to help you cover some of these costs will make a stressful situation less stressful. If you are married, the amount that you help your parents should be agreed on between the two of you.
You should not give money to your parents without your spouse or partner knowing about it.
Protect Yourself and Your Finances
Do not co-sign on a loan or a mortgage with your parents. Do not take the property in your name without realizing the additional things you will be responsible for such as taxes or utilities connected to the house. Do not sign documents that you will be responsible for the final health care costs of your parents. When you do this, you take on the financial responsibility of your parents even after they have died. If they sign the documents, the debt will be settled by the estate and then you will receive your inheritance out of what is left.
If the estate does not have enough money to pay the remaining debts, they will be forgiven, but if you signed for them you will still be responsible for them. You are not responsible for your parents' debts when they die.