In your teenage years, parents cramp your style by chaperoning your senior prom or volunteering at the football game snack shack. But when you're an adult, your parents can do far worse than embarrass you. They can ruin your prospects for a comfortable retirement if they didn't save enough during their working years.
Research over the last several years confirms that seniors are increasingly receiving financial help from their adult children. In 2017, Pew Research Center estimated that 14% of adults living in someone else's home were parents of the head of household. That percentage has doubled since 1995. More recently, AARP found that 32% of adults between the ages of 40 and 64 had provided ongoing financial support to their elderly parents. Forty-two percent of respondents to the AARP survey said they expected to fund their parents in the future.
Realizing your elderly parents can't support themselves puts you in an awkward spot. You feel obligated to help, but you worry about sabotaging your own retirement. Whether you're already fielding financial requests from your folks, or you suspect they'll need your help soon, here are three steps you can take to balance your parents' financial needs with your own.
1. Start the conversation
Talking openly with your parents about finances is challenging. Your folks may be embarrassed or unwilling to share details about their situation. Or you may feel you don't have the right to ask. Unfortunately, you'll have to get past this. Giving your parents money without an open line of communication will create resentment, and that complicates an already emotional situation.
PBS recommends kicking off the money conversation with your intentions. You care about your folks, and it's your intention to ensure they maintain a decent quality of life. You're best able to do that when you have some insight into their financial needs. Approach this topic gently -- you don't want to imply that your folks aren't capable of managing their own money. Position yourself as trustworthy and non-judgmental in order to open the door to more detailed financial conversations.
2. Help them budget
Offer to help your parents create a budget. Let them know how much this will help you with your own household budget: You can develop a more realistic plan to provide for them -- and yourself -- when you know what's going on with their spending. You can also help them identify savings opportunities that don't require major lifestyle changes. For example, you could:
- Help them get new quotes on auto and home insurance.
- Cancel old subscriptions they forgot they had.
- Contact their utility companies to see if they have an even-pay program. This involves estimating their annual costs and splitting it up into 12 monthly payments to avoid seasonal spikes.
- Negotiate new rates on cable and other services.
- Automate their bill payments to help them avoid late fees.
If your parents are new to budgeting, step in as their coach. Walk them through the process of totaling their income, and then use that total to set spending limits by category. Encourage them to take their new budget seriously, but let them know the world won't end if they slip up.
Talk them through different ways they can track their spending. Younger generations may gravitate toward apps and spreadsheets, for example, but your parents might prefer pen and paper. Whatever method they choose, schedule a weekly review with them so you can provide guidance and support as needed.
3. Communicate boundaries
If there's no way your parents' income will cover their expenses, then you have tough decisions to make. It's not productive to sacrifice contributions to your retirement accounts to support your folks. That only pushes the problem down to the next generation. Instead, brainstorm how you can support them in non-financial ways. You might help them explore downsizing or getting a reverse mortgage on their home. Or, you might offer them space at your house in lieu of writing them a check every month.
On the other hand, you may value your privacy above all else. In that case, rooming with your parents won't be an option.
The point is, decide where your boundaries are, financially and otherwise. Communicate these boundaries to your parents as positively as you can. And then, together, discuss solutions that work for everyone.
Partner with your parents
Solving your parents' financial woes requires compromise on both sides. They'll have to commit to a workable budget. And you might have to take the high road with respect to communication. That might mean forgetting about how they embarrassed you at prom all those years ago. And it definitely means being respectful and non-judgmental as you nudge them toward financial stability.
Minimize the impact to your own finances by helping them trim their spending, coaching them on best budgeting practices, and providing non-financial support where appropriate.