Managing Your Parents’ Finances
Most parents will make selfless sacrifices for their children. Whether they work long hours to earn enough to defray current expenses or forgo their own pleasures to put aside for their future education, responsible parents will always find ways to provide for their children's financial needs.
It is expected that parents will function as caretakers for their dependent children until they are able to fend for themselves in the adult world. However, sometimes the roles are reversed when adult children are obliged to take on the responsibility of managing their parents' finances.
Parental money problems
One reason why younger family members may be forced to take control is if their parents are facing money problems which compromise their ability to pay their bills. This could happen if the parents have unmanageable debt, lose their sources of income, or if they encounter business setbacks.
Depending on the severity of the parents' money issues, they may need to receive budgetary support from their children to help them to take care of their bills. Children may also have to bail out their parents by taking over their loan payments or liquidating assets to pay off their obligations.
If they are totally unable to provide for themselves, it may even be necessary for the parents to move into their children's homes in an effort to consolidate expenses. The role reversal becomes complete, as the parents now have to be dependent on their children to take care of all their financial needs.
Helping parents has consequences
Managing the change process when older people lose the capacity to fend for themselves can be challenging for both the parents and adult children. Some parents may resent taking instructions from their children while others may be depressed about their financial woes and unresponsive to advice.
Many persons in these tight economic times do not have sufficient money to take care of their own bills, much less to help out their parents. If the children are also experiencing financial difficulties, having to provide for the parents' needs might lead to increased money stress for them.
If the adult child has his or her own family to support, then adding the parents' expenses to the mix can bring further complications to a difficult situation. It's not uncommon to see families being torn apart because one spouse's parents have placed extra pressure on the household budget.
Accepting the new reality
If you are in a situation where you have to provide some level of financial assistance to your parents, you first need to accept that you do have some responsibility to help them get back on their feet. The law actually has provisions that children are legally obligated to care for elderly, dependent parents.
It's important for your parents to reveal the full extent of their money problems to you, so that you know exactly how serious their situation may be. Try to be supportive when discussing their affairs, because if you are too critical of them, they may not share all their embarrassing financial details with you.
While you are duty-bound to do what you can to help your parents, your support must be contingent on your financial capacity to assist. You might feel a sense of guilt if you really don't have enough money to give to your parents, but you must also be honest with them about your own challenges.
Making an action plan
Once you are privy to the details of your parents' financial problems, then suggest to them that you can all work together to come up with a feasible solution to their problems. It might be necessary to seek advice from a representative at your financial institution to determine the best way forward.
You should also encourage your parents to learn more about smart financial practices by sharing reading material about money with them, showing them financial advice websites or taking them along with you to financial seminars. With more knowledge, they can find their own ways to fix their issues.
If your parents are resistant to your suggestions for change or reluctant to get expert help to solve their problems, then you may need to show them a little tough love. Explain that while you want to assist them, you will not support them in continuing the harmful money habits that got them into trouble initially.
Restoring the balance
If you have decided to give your parents money until they get over their financial hurdles, you should ensure that their action plan includes finding ways to create their own income. While the saying goes, 'You can't teach an old dog new tricks,' anyone at any age can learn how to earn extra money.
Helping your parents through their challenges is a great way to demonstrate your love for them. Practise smart money habits so that they can look up to you as a positive role model for managing your own finances, and you might just help them to break free of their financial challenges.
Next week we will look at some strategies to manage the financial affairs of your elderly parents.
Cherryl is a money coach, business mentor and founder of Financially S.M.A.R.T. Services. Her upcoming book, "The 3 Ms of Money" will reveal all the secrets she learned about financial success. Read more on money and business matters at financiallysmartadvice.com and entrepreneursinjamaica.com. Email comments to firstname.lastname@example.org.