How to Give to Parents Without Risking Your Own Future

(3 Minute Read)

The desire and obligation to care for our aging parents is cross-generational in the United States. Ameritrade found in a 2015 study that 25% of the Boomer generation and 20% of both Millennials and Gen X-ers are supporting either a parent or an adult child. Of those groups, it’s surprising to learn that Millennials are actually the ones giving the most support to their parents, in terms of dollar amount. That 20% is supporting mostly their parents, at a national average of $18,250 a year. Only 8% of those Boomers were supporting their parents, by comparison, and the average support dwindled by almost half to $9,700 annually. 13% of the survey’s Gen-Xers are also supporting parents at about the same cost.

Regardless of your age or the dollar amount, providing for both yourself and your parents can be a daunting task and can even have a negative effect on your financial future. If you’re supporting Mom and/or Dad these days, here are some tips to make sure you’re not breaking your own bank in the process.

Gift or Loan?
One important thing to establish is if the money is a gift or a loan. Usually it will be seen as a gift for simplicity’s sake. However, if your parents want to pay you back, or if the sum is large enough that you need them to do so, get paperwork drawn up which details exactly when and how the loan must be repaid.

Discuss Terms of Use
If you’re giving your parents money to live on, and they’re using it to buy cigarettes but you want them to stop smoking, what do you do? Is it appropriate to ask them to stop buying them? This is just one example of how paying for someone’s living expenses can lead to conflict. Before you give them a monetary gift or loan, any of these conditions should be established, rather than leading to conflict or further tensions after the money has changed hands.

Give in Smaller Ways
Maybe you can’t afford to give your parents money for the rent, but you can try to help out in smaller ways, like with groceries, gasoline, or paying for prescriptions. This might even be a better solution to some parents, who won’t want to accept money, but will take gifts in other forms. If there’s a small list of things you’re simply not comfortable paying for, simple gifts can help avoid discussing them all together.

Explore Their Options
If your parents are struggling to pay a mortgage on a big house for just the two of them, think about selling it and having them rent or buy a smaller space that costs less. If they have two cars, sell one. And if they have several life insurance policies, you could consider selling one for a life settlement. Not only will they recoup some of the benefits of their investment in the insurance when they need the cash, they won’t have to pay the premium any longer.
Our parents are very near and dear to us, but sometimes supporting them financially becomes a burden that is simply too hard to bear. Taking care of them after years of them taking care of you is natural; however, you also have to keep your own financial solvency front-of-mind. Take these tips to heart when offering or agreeing to support your parents financially.

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