In Focus – SCCCU Blog

Our parents cared for us for (at least) the first couple decades of our lives. But does this mean we need to take care of them for the last few decades of theirs? As the Baby Boomer generation prepares to exit the workforce in record numbers, it’s a question more and more people are asking. If your parents need your help (time or money), here are the essential considerations.

Should You Help Your Parents Financially?

In 2023, the average retirement savings for American households was just $87,000. Even when you add Social Security into the mix, it’s just not enough to ensure a comfortable retirement for most people — and some are looking to their adult children for financial help. If you’re the adult child, should you give it? With a plate full of your own financial goals, it’s complicated. “Younger people have a lot on their plates,” notes Beth Pinsker, a financial planning columnist at MarketWatch. “They might have student loans, mortgages, children they have to provide for, college costs, car payments, their own health concerns, and they have to save for their own retirements.”

Knowing how to help aging parents and deciding whether or not you should boils down to taking stock of how well you are managing your own financial obligations. “The rule of thumb in financial planning is always to secure your own life vest and put on your own oxygen mask first,” says Pinsker. “It's a cliche because it's true. You have to make sure that your financial life is in order before you can care for somebody else's, whether it's a child or a parent.”

If you’re considering helping your aging parents financially, the first step is taking a hard look at your budget. Do you have any wiggle room? If so, determine how much and then talk with your parents about their actual needs. From there, you — and your siblings, if you have them — can figure out how to step in.

Consider Whether Costs Could Rise

Once you’ve decided helping Mom and Dad is feasible, you need to plan. Pinsker says one of the biggest things to be aware of is that while some costs may seem high now, they could likely be more expensive later. For example, long-term care insurance. While helping your parents with premiums might seem like a significant outlay today, the alternative — paying out-of-pocket for long-term care further down the road — could be a much heavier lift. “You need to look globally at your overall budget and figure out whether dollars are better spent today than tomorrow,” says Pinsker. “It’s all a balance.”

Add a Touch of Advice

On the other hand, it’s not always about the Benjamins. Sometimes, parents struggling with basic monthly expenses need someone to reassess their financial situation with them. “That’s something families have to look at together,” says Pinsker. For example, instead of helping pay your parents’ mortgage, it may be necessary to examine whether they are in the right living situation. “It might be better for them to move in with a relative or assisted living,” Pinsker notes. You have to start talking about those things together as a family and see which path is right for everybody involved. “They might want to stay in their house, but if you’re going to have to pay for it, [it becomes a negotiation].”

Marguerita Cheng, a Certified Financial Planner and Chief Executive Officer of Blue Ocean Global Wealth, works regularly with clients looking to provide monetary support to their loved ones. She agrees with Pinsker that the help parents need doesn’t always come with providing cash. Sitting down and reviewing their budget might help identify problem areas, like recurring expenses and subscriptions for streaming services, prescription drugs, and other household expenses that could be canceled or reduced. “I think it is helpful, at a minimum, to be an extra set of eyes and ears for your relatives,” says Cheng.

You may find other creative ways to save by opening the lines of communication. Cheng, for instance, added her parents to her family's cell phone plan. “My parents were able to have more robust coverage at a significantly lower cost,” notes Cheng. “I understand that not everyone can absorb this extra cost. My parents still realized significant cost savings if the extra expense was cost-prohibitive. I could always ask my parents to reimburse me,” she says.

When Helping Too Much Hurts You and Your Goals

As you help your parents, there might be a time when you realize it’s simply too much. More specifically, Cheng says there are some bright red warning signs to look out for: “If you find yourself not being able to pay your bills, incurring credit card debt, depleting savings and/or drastically reducing savings towards your long-term accumulation goals, such as college or retirement.”

“You [also] can't stop saving for your future to address your parents’ current financial needs,” says Pinsker. If you’ve been helping your parents financially and concluded that it’s become too much to bear, it’s time to hash it out. “These conversations are uncomfortable,” says Pinsker. “But [they don’t have to be] embarrassing.”

The best solution is to talk to your parents continually — and keep tabs on how they’re spending any funds you provide. “The same way that you wouldn’t just hand over money to an 18-year-old going off to college and not ask questions about where the money is going to figure out if it's being spent responsibly, you shouldn't be handing money over to anybody without really knowing what the goal is,” Pinsker notes.

The Bottom Line

If you’re deciding how — and if — you should help your aging parents financially, the advice is pretty simple: Help if you’re able, but try not to sabotage your financial goals. If you continue to struggle with whether or not to lend a hand, one of the best steps you can take is to work with a financial professional to chart a path forward. “Having an unbiased, objective third party evaluate your situation to determine both the amount and duration of support can help guide the conversation,” says Cheng.