Is it time to help your parents financially? That depends on whether they have retired and where you are financially.
Firstly, to help your parents financially, you have to be in good financial standing. Savings are definitely a requirement to take on additional expenses.
Now, savings are not there as a safety net for other people. It is there in case of job loss and retirement planning for yourself and to take care of your kids.
Now as people age they work less and have reduced income to cover the increasing costs of living. For a lot of elderly, they at least have their houses paid off which really helps when it comes to expenses.
Debt
The problem for a lot of people is they carry debt well into their 70s. A study found that 35% of households headed by people 75 and older carry debt. In households headed by adults between 65 and 74, 62% carry debt. This is a big deal because that debt doesn’t just disappear. It passes on.
When it comes to helping your parents, you have to evaluate your own debt situation as well as your expenses compared to your income. Most people have a place they can find in their budget for at least a little help financially for their parents.
Their generation has been squeezed for money by younger generations for years and when it comes time to get some of that help back, the younger generation finds it difficult to help.
Evaluate
To help your parents financially first evaluate what constitutes actual need for help.
Only help with needs not wants. It sounds mean and rough because of all they’ve given you, but you have to stay afloat too. If your parents need help with their electricity, water, or mortgage, that is a good reason to help. Don’t give them a loan for a day at the track or something like that.
Helping them has to not be harmful to you.
When helping your parents financially, don’t cosign on their loans or take on any of their debt. As soon as you do, you become responsible for paying off that debt, and creditors can come after you. If you want to help them pay off a debt, gift them the money to pay it off. Think of it this way: If you can’t afford to gift it, you can’t afford to cosign.
If you’re going to help you have to know exactly where money is going every month. Slowly you will take over expenses the older the get and you wouldn’t want to take over an expense when they have the money, but they’re spending it on things that are grossly irresponsible.
There are also government assistance programs that can help, but government programs are grossly mismanaged and lack proper oversight. In order to be available to get government assistance net worth has to be reduced sometimes.
While reducing their assets there is a temptation to touch retirement accounts. If your parents make a withdrawal from their retirement account, the money is gone. And if the situation is dire enough, that withdrawal probably won’t significantly change their situation. That’s why it’s sometimes better to file bankruptcy than to drain their retirement savings, which might be protected from creditors.
Cut Expenses
The next step to help your parents stay afloat is considering the option of cutting a lot of their expenses by having them stay with you. This is usually a viable option once the children are out of the house. It’s even easier, though sadder when there is only one parent to worry about at that time.
The greatest generation was taken care of by our parents now it’s time to take care of them.
Financially under Obama, the economy was so bad the elderly and their children and grandchildren struggled to make ends meet. It’s still there, but it’s improving rapidly under the Trump administration.
Don’t let your family down if you can help it and don’t let them struggle. Of course, it’s not always feasible to help them.
You could still be young and financially struggling as many 35 and under are doing. In fact, helping your parents in their early 50s is usually just a perk for them and not a necessity as they are still completely involved in the workforce.
The future of the older generation looks bleak with the way their children are looking financially.
The good side of all of this is the ability of everyone to turn around their financial situation in a short time.
Even if your parents were horrible helping them live out their golden years should be something you at least consider. If you don’t help them out, you can at least take advantage of this time to get your finances in order.
The Future
Your parents couldn’t have anticipated the economic crash that would crush the market and income of millennials on a massive scale.
Millennials are some of the most ill-prepared people financially because of lack of discipline, lack of job prospects, and wasted time in college.
Now a lot of you aren’t millennials and your parents are approaching or even past retirement age so take two things to mind when considering aiding your parents financially, evaluate your finances and needs are all they need help with.
This is good advice for you too. Remember wants are just that, wants. Wants are also fleeting. If you want a bottle of wine every night but you also want to purchase a nice living room set, put it into perspective. Say no to yourself now so you can say yes to yourself. When you say no to yourself and only splurge on wants on occasion, you won’t end up needing your kids to help you when you’re older.
Make good decisions not only for yourself but your children. Putting a burden on them isn’t good, if they want to help that is wonderful. Your parents are likely not asking or being a burden so make sure you help where you can and when you can. They deserve it.