How to Begin Helping Your 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.
But, it is important to make a plan to communicate with your parents so you can determine what needs to be done, and how you can help. Follow the below steps in order to learn what the proper steps to take would be.
Determine How Much Financial Help Your Parents Will Need
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 to 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 early retirement. For them, making ends meet may be more difficult.
If this is the case, you may need to help them create a plan to help them 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.
Help Your Parents Financially Without Giving Them Money
Once you understand your parents’ current situation and retirement plans, you can begin planning what you can do to help them. Some of those options don't necessarily involve your opening up your wallet. It may one, or all, of the following:
- Help them pack up and downsize their home.
- Go over their budget with them and helping them see what they need to do to help the money stretch.
- Give them generous gifts a few times a year.
- Let it be known that you are available to help with the occasional car repair or home repair.
This should all 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.
Things to Remember When Helping Your Parents Financially
There will come a point when you will need to step in to help with the finances.
Make a long-term plan to help out your parents.
This likely will not happen for several years, but it is good to have the plan in place now so you are not scrambling to get power of attorney or find the correct account information should your parents experience serious illness or dementia.
Make a budget to be able to help.
It is important to plan a budget to help your parents. Here are some examples of things you need to budget for:
- flying out to help when there is surgery or medical emergency
- having your parents over to dinner with you a few times a week as they get older
- taking them grocery shopping
Start setting aside money now.
You may be young as you read this, but it is never too early to start saving—especially for your parents. This is important because some things happen suddenly without warning. Have some money set aside to help you cover some of these costs. They will make a stressful, last-minute situation less stressful.
Agree upon a budget if you are married.
The amount you each set aside to 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.
These are the things you should not do in order to protect yourself:
- Co-sign on a loan or a mortgage with your parents
- Put property in your name without knowing additional things you will be responsible for (taxes or utilities connected to the house)
- Sign documents you will be responsible for in the final health care costs of your parents.
When you do all of the above, 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.