How to Manage When Your Parents Need Financial Help From You

The Squeeze

• It’s often tricky — both emotionally and financially — when you parents need money from you.
• Giving your parents money to help solve short-term cash flow issues is relatively simple, but be sure to talk with them and understand their big financial picture.
• If you can't (or don't want to) lend any money, consider working with them to set up a budget or connecting them with a financial professional

If your parents ever ask you for financial help, you'll probably think back to every time they lent you money when you were younger. Or when they bought your kids something they really wanted, even if they didn’t always have the cash on hand. Or the times they paid for things you needed, like clothes, food, a roof over your head, and maybe even luxury items like college or a new car. 

When the tables turn and your parents ask you for financial assistance, you might want to say yes without a second thought. But is it the right decision for you and your family? Whether you say yes needs to be based on not just love, but also your current financial situation. 

So here’s how to approach lending a financial hand to your parents: 

Figure out why they’re asking

Some parents might have lost a job or ended up with an unexpected expense that they can’t afford, like a medical bill or car repair. However, some parents might be notoriously terrible with money and are asking you for help. Before writing a check, consider asking them a few key questions to start, like:

• What do you need it for?
• What does your financial picture look like right now, and in the long-term?
• Is there anything else that’s financially pressing you’re putting off?

If your parents are frustrated by your questions and perceive them as being judgmental, remind them that you want to be able to help with the big picture, not just pitch in with short-term cash. (This is also a good strategy so you can be aware if this one loan is likely to lead to others.) Given that 36% of American retirees between age 60 and 69 don't have enough money to cover even a single year of minimal care, your questions are not misplaced. 

You also want to ask questions about their overall financial picture, because a parent who previously had healthy money management skills and is now suddenly struggling with finances could also be showing early warning signs of dementia and Alzheimer’s disease. So no matter how you look at it, wanting to know more is about care, not questions.

Review your income

If you have the money to spare, you might think about handing over what your parent or parents need with no questions asked. But be clear up front whether this is a gift or a loan. And if it's a loan, you'll need to discuss all the terms in advance: payback timeframe, whether they will pay interest on the loan, when payback will begin. And, of course, as with any loan, there's always the possibility you might not get it back — and you need to be comfortable with that reality.

Take the time to go over your finances and review your budget before you leap to yes. Remember that saving for own retirement and paying off any debts you have have to be a priority. Only make this jump if you have the spare cash to do so.

Keep the discussion going

Your parents might have come to you in an emergency and don’t expect to ask you for money again anytime soon. But don’t assume that their needs are over and done with. Keep talking to them about their income and where their money goes. Become a partner in understanding their larger financial picture, and offer your time and attention to help them think through tricky things like long-term health insurance and whether they need to appoint a financial proxy in case of illness or an accident, so you can ensure their bills are paid and their assets are protected. Even though money is still a taboo topic — especially among older generations — try to get them comfortable talking about finances with you. 

Help in other ways

While giving cash is an easy way to help, it might not always be the most efficient or feasible — at least for you. Aside from giving your parents money, there are other ways you can help them out. For instance:

Pay for a few meals or take them grocery shopping. If you don’t live with your parents, this is a great excuse to hang out with them regularly. You may not have to adjust your budget too much to incorporate this new expense.

Add their phones to your plan. Adding lines to your cell phone plan will cost you a little extra and save them a lot. It’ll also give you peace of mind that their phone will never get shut off from their having missed a bill payment.

Take them to appointments and errands. If your parents need a ride somewhere, try to fit it into your schedule. If you work for yourself or from home, you might have a little bit more flexibility with this. If you can, work their errands around your typical day and week.

Create or update their budget. Even minor financial changes can have a significant impact on your parents’ financial well-being. Sit down with them and review their budget. Go over their income and expenses to see where they can earn more and cut out unnecessary spending.

Develop a financial plan. While you might not be the right person for the job, you can give your parents the tools they need to get and stay on the right track. Help them find a financial planner and, if necessary, an estate planner or eldercare financial planner. Getting the right team in order and setting up a long-term life plan could mean less anxiety and stress for all of you, which is always a good investment.