How To Help Your Parents Financially Without Going Broke

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An increasing number of parents are leaning on their children for support. If you are one of these people, you must understand how to help your parents financially without endangering your finances. Read on to learn nine steps to take to help your parents without going broke.

helping-parents

  • Assess the Financial Situation

Before you take any action, you need to evaluate your parent’s financial situation. You should sit down and discuss:

  1. Where is their money? Ask your parents about their assets, income, pension plans, IRAs, Canadian Pension Plan (CPP), and equity in their home.
  2. How can their money be accessed? Do they get monthly CPP payments? Can the home be sold?
  3. Are there any penalties? Has the home or the IRA market values depreciated?
  • Look into Downsizing and Consolidation Options

If your parents live strictly off CPP payments or other pension funds, they may need to make drastic changes to survive. This might mean moving to a more affordable home or looking into debt consolidation loans.

  • Prioritize Your Parents Bills

You need to ensure that your parents are taking care of the most important bills first. This means prioritizing bills like the mortgage, utilities, car payment, and food. If your parents are elderly and unable to take care of their bills, you may have to step in and take over. You should also be aware that senior citizens often fall prey to scammers both online and offline, and you should take steps to protect them.

  • Help Out Responsibly

It’s perfectly fine to give your parents $200 or $300 a month to help them out with their essential bills. However, you should not sacrifice your own retirement funds or max out your credit cards to help them out. If you go into debt, you won’t be able to help anyone. Therefore, you need to be prudent and give only as much as your budget allows.

  • Be Cautious about Co-Signing Loans

Your parents may need you to co-sign a loan, but it’s important to remember that you’ll be on the hook to pay for your parent’s share of the debt if they pass away before the debt is paid. For that reason, you should look for alternatives before taking out a loan. For example, if your parents need new appliances, consider buying them used.

  • Make Sure Your Help Isn’t Taken for Granted

It’s very possible that your spending philosophy won’t be the same as your parent’s. However, there’s no contract that says you have to provide your parents with financial support. If you feel that they’re wasting your money or are not willing to make sacrifices to their lifestyle to accommodate their financial situation, you can refuse to give them money. While this may cause a rift in the family, you must stand up for yourself. You are not your parent’s piggy bank. They need to be willing to accept the reality of their financial situation and make the necessary changes.

  • Hire a Mediator

As the child in the relationship, it can be challenging to make your parents listen to you. If this is the case, you should hire a third-party, such as a financial consultant, attorney, or family counselor, to help you have an honest conversation about the expectations that come with your financial support. Furthermore, if your parents are in denial about their financial situation, having a financial professional explain it might help them come to terms with it.

  • Make Use of Trusts and Properties

If you’re financially well-off, you might want to consider setting up a trust for your parents. A trustee can help better regulate spending and reduce family tension. Your parents might also choose to give you their property in an estate plan. This would allow them to continue living there, either free or through a leaseback, but you would own the property and handle the upkeep and expenses.

  • Look Into Long-Term Care Insurance

If your parents are young enough, you might want to consider long-term insurance. You don’t want to think about your parents having a stroke or requiring nursing care, but these health issues can arise, and they are expensive. Therefore you should consider getting long-term care insurance so that your parents are covered if they need nursing home care, home health care, or other medical care not covered by the provincial health plan.

Conclusion

Helping your parents financially is an act of grace, but it doesn’t mean you should go broke as a consequence. Instead, you need to have a frank conversation with your parents about the sacrifices they need to make to accommodate their current financial situation and about how much help you can offer them. It may be an awkward conversation to have, but in the long run, it will pay off.

 

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How To Help Your Parents Financially Without Going Broke
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Helping your parents financially is an act of grace, but it doesn’t mean you should go broke as a consequence.
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