Maybe after binge watching every episode of "Two Cents" you finally decided to make some big changes.
You looked your debts right in the eye and made a plan to pay them off in 10 years.
You budgeted your household spending, and even started setting aside funds for retirement.
For the first time in your life, you feel like you’re really in control of your own future.
But there’s still one financial storm brewing that might not be on your radar.
A money monster growing in your closet that even the bravest budgeter has trouble facing…
your parents.
In many cultures, it’s normal and expected that younger generations take care of their
parents in their old age.
But during 20th century America, pensions, social security, and other retirement plans
made it possible to remain independent throughout one’s autumn years.
These days, however, with pensions in decline and stagnant wage growth making saving for
retirement even harder, seniors find themselves caught between cultural expectations of self-reliance
and economic reality.
More than a third of people over 55 have no retirement savings at all.
And only 13% have made any written retirement plans.
If you care at all about your parents’ well-being, this could very well be your problem, too.
Unfortunately, as we’ve mentioned in a previous video, parents and kids don’t talk to each
other about money very much.
It can be especially awkward when the roles are reversed.
Parents don’t like to feel like a burden and kids don’t like to think about their
parents needing help.
So it’s very common for adult children to get blindsided by Mom or Dad’s dire financial straits.
There are enough unpredictable money problems in the world.
This doesn’t have to be one of them!
But it does mean that you’ll have to find a way to initiate the conversation.
You could just blurt out “Hey guys!
Am I gonna have to support you at some point?”
Or, if you want a more delicate approach, you can start by asking them to create a “Just
In Case” document, which outlines where their assets are located and the contact information
of any advisers or attorneys.
By going over such a document with them, you should start to get an idea of their overall
financial situation.
The best case scenario is that they’re in great shape!
Their retirement is funded and they’re even planning on leaving something behind for you
and your siblings.
Even in this situation, it’s good to have the talk.
Plenty of families are torn apart by estate squabbles that could’ve been avoided with
clear communication.
Or perhaps your parents have enough to live off of--as long as nothing goes wrong!
In that case, you might offer to help them understand their Medicare options or shop around
for long-term care insurance.
If the situation is worse than that--and you are the only thing standing between them and
poverty--you have to consider what kind of assistance will be the most effective.
Direct gifts of cash are not always a good idea--they can create discomfort, and might
not even be effective if your parent has a historically troubled relationship with money.
Instead, think about what expenses you could cover for them, like groceries or rent or travel.
After all, they fed and housed and chauffeured you around when you were little, now you’re
just returning the favor!
But before you commit any dollars, you’ve got to be sure you can afford it.
Amongst people who are financially supporting their parents, the average amount of non-mortgage
debt is $22,000.
And over one-fifth say their assistance is costing them their own savings.
Wrecking your own financial health to support your parents will only keep the cycle of dependency
going, and may someday put your kids in the same crunch you now find yourself in.
Like they say in those airplane safety videos, you’ve got to get your oxygen mask on first
before you help others with theirs.
If you’re already struggling with your own debts, it’s strongly recommended to find
non-monetary ways of helping.
You could sit down with them and help them write a budget (we made a handy video to get
you started).
You could volunteer to run errands or do chores for them.
Or--the big one--you could offer them a place to live.
65% of seniors do not fully own their homes, so just eliminating their housing expense
could make all the difference.
If you find that your parents are deeply in debt, you’ll have to judge whether it’s
worth it to help pay them it off.
Creditors can go after estates, but not next of kin.
So if their debt is equal to or exceeds the value of their estate, there are
a lot better uses for your money than paying interest on loans that will may ultimately
be forgiven.
When things are this dicey, the best thing you can do is call in professional help.
A certified financial planner can look at all the pieces of this family puzzle and help
you draw up a plan to achieve three major goals: (1) ensure the comfort and health of
your parents, while (2) allowing you to keep paying off your own debts and (3) saving for
your own retirement.
Bringing in a third party can also help defuse tensions, so it won’t seem like a you vs.
them situation.
After all, maintaining a positive relationship with your parents is still the most important thing.
It’s unfortunate that talking plainly about money is taboo in America.
In a study done by Wells Fargo, 44% of Americans say that talking about personal finance is
harder than talking about politics, religion or death!
But it’s precisely that fear that lets things fester in dark closets and eventually grow
into monsters that no one wants to face.
So do your folks a solid and bring the topic up earlier than you probably want to.
Let them know that you’re on their team and want to make sure they’re getting what
they deserve after a lifetime of hard work.
They probably helped you face your monsters as a kid, so consider it a privilege to help
them deal with theirs.
And that’s our two cents!
Have you had "the talk" with your parents?
Let us know how it went in the comments.