How to Help Your Parents Financially Without Getting Yourself into Debt

July 28, 2020

It might seem uncommon if your aging parents are asking you for money. However, it's actually something that's more common than you think.

According to a survey from the AARP, about one-third of adults in their 40s, 50s and early 60s said that they’ve given their parents money in the past year. While half of the respondents said it was $1,000 or less, at least 20 percent said they’ve given as much as $5,000 or more.

Wanting to help your parents out financially is certainly a respectful ambition. After all, they spent the first 18 years of your life raising you and giving you every advantage that they could. However, most of us aren’t made of money. Unfortunately, a lot of households have financial concerns or even serious problems of their own. The added burden of helping out mom and dad could just only make things worse.

To help navigate your way through this decision, here are seven tips for helping your parents out financially without making things worse for yourself.

 

1. Talk Openly with Your Spouse

If there’s one thing you’ll want to do before you do anything else, it will be to make sure that both you and your spouse are on board with what you’re about to commit to.

Please don’t underestimate how absolutely critical it is to talk this decision over with your spouse first. Even though your intentions for helping your parents may be good, they can have unintended consequences on your marriage if you both don’t fully support it.

After all, when it comes to money, issues with finances is the number one reason that couples get divorced. Even if you’re in a position where giving the money won’t cause a problem for your household budget, the act itself can lead to emotions of jealousy and resentment.

To avoid all of this, talk as openly as possible with your spouse about the situation. Listen to what both people have to say and try your best to be empathetic, even if the conversation isn’t going in the direction you want it to go. Weigh both the pros and the cons of helping your parents and don’t dismiss any of the reasons that either of you come up with.

Whatever you do, don’t try to avoid the topic or force the other person into a decision. Especially if you’re giving money to your parents without telling the other spouse, don’t try to hide this fact. It will just make things worse once they eventually find out. 

 

2. Assess the Full Situation

When your parents come to you for money, it's important that you get the whole picture before you commit to providing any financial aid.

Think about why your parents are asking you for money in the first place:

  • Do they just need a one-time payment to get back on their feet?
  • Did they lose a source of income and need you to make regular monthly payments?
  • Have they gotten themselves into debt? If so, how much?

On top of that, you’re going to want to understand what the terms of this financial support will be:

  • Is this a loan that will be paid back? Will you charge any interest? Does it need to be made official?
  • Are you giving your parents the money with no expectations in return?

There’s a myriad of possibilities, and it's critical that you get all of the facts upfront. Both you and your parents should agree and acknowledge these terms before any money changes hands.

 

3. Remember Your Financial Limits

While it's perfectly respectable to want to help out your parents, you definitely shouldn’t do so at the peril of jeopardizing your own finances. Take into consideration the cost of helping your parents just like any other expense (as if this was a new loan payment or similar bill).

For instance, let’s say your parents asked you for $500 per month. Would you be able to accommodate this? How would that change things for you and your family around the house? What kinds of purchases would you have to give up to make this work? Would it cause you to not be able to meet your own financial goals? Or worse, would it cause you to start missing bills of your own or get into debt?

Also keep in mind that sometimes once you’ve started helping out your parents, they might try to come back to you again to ask for even more money. That’s why it's important that you set this boundary in advance. Review your budget, discuss it with your spouse, and agree on an upper limit that you absolutely cannot exceed.

 

4. Don’t Risk Your Credit Score

While giving your parents money is one thing, don’t let them ask you to do anything that might also jeopardize you financially in other ways.

For example, if they need help getting approved for a loan, don’t co-sign for it without knowing what the worst-case scenario could be. If they were to miss a payment or even default on the loan altogether, imagine the negative consequences that could have on your credit score.

Consider looking for other ways to supplement the loan that are not tied directly to you legally. Or, if at all possible, avoid taking out any loans altogether and seek out other alternatives.

 

5. Get Your Siblings on Board

If you’ve got any brothers or sisters, then it shouldn’t be 100 percent your burden to financially support your parents. Let your siblings know the severity of the financial situation with your parents, and then ask them if they can lend some support too.

Though it may put you in a somewhat awkward position, by doing so it could dramatically cut down how much you’d have to contribute. For example, if you’ve got 2 other siblings, that means the amount your parents are asking for could be cut into thirds. That’s a savings worth asking for!

 

6. Consider Hiring a Financial Mediator

Giving your parents money isn’t the only way you can help them. Part of getting them back on track can be to change their financial situation or habits for the better.

To do this, consider hiring a financial counselor or advisor. A professional will be able to ask the right questions of your parents that will help better identify the root of the problem. In addition, they’re also trained to give advice or suggestions that you may not even know exist.

If nothing else, just simply hearing an opinion from a third-party might influence the situation. Whereas your parents may dismiss your advice since you are their children, they might be more receptive to hear it coming from an outside professional.   

 

7. Don’t Let Yourself Feel Guilty

Whether you decide to give your parents as much as you possibly can or nothing at all, it's ultimately up to you.

Your parents or even other people may try to guilt you into providing more. No matter if it's just a few bucks here and there, any amount should be appreciated. Only you and your spouse know the details of your personal financial situation. It’s not up to anyone else to try to pressure you to give them something more than you feel comfortable doing.

Overall, both you and your parents are adults. Leave the emotion out of the conversation and always try to handle things civilly and respectfully.


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