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You love your parents and feel grateful for everything they’ve given you in life. And while you care about them deeply, you know that money management isn’t their strong suit.
Whether they heavily rely on you or you just want to plan ahead in case they need you one day in the future, figuring out how to help your parents financially can be a stressful and emotional challenge. You need to set up a system and process that includes ground rules and boundaries for contributing without sabotaging your own financial success.
Make Sure to Communicate
You don’t need to make the decision to help your parents out by yourself. If you’re unsure what their financial situation looks like and if they need (or want) your help, start a conversation.
Because money convos can get complicated, especially with family, consider bringing in an objective third party. Paying for a financial planner to review your parents’ current financial situation and create a plan based on their needs means any advice or suggestions comes from them and not you — which may be important in avoiding making mom and dad feel like you’re trying to tell them what to do.
Once you know if they need help and how much, you can incorporate providing some level of financial support into your own goals and plans. Even if they don’t need your help right away, preparing now will help you provide support without going broke.
Know Your Limits
Just like you need to know your parents’ financial situation before you can determine how much help they need, you should understand your own finances so you know how much help you can provide. You can include providing your mom and dad with some amount of funds by setting that up as a savings goal within your own financial plan — but you need to prioritize other goals first.
You need a fully funded emergency savings account (aim to put away 3 to 6 months’ worth of income to accomplish this). You should also be on track with your own retirement goals.
This is a situation that’s very much like putting on your own oxygen mask on the airplane before helping others. You can’t help your parents with money if you own situation is suffering.
Putting yourself in a position where you’re not saving, or even taking on debt, for the sake of giving money to your parents does no one any good. Eventually, you won’t be able to help them anymore — and you won’t be able to help yourself, either.
It’s okay if you can only contribute a small amount to help your parents get by. You can consider increasing that over time as your own financial situation changes, but for now? Know your limits and stick to them.
Set Up a Separate Savings Fund
An easy way to stick to your limits is to create a separate savings account and earmark the funds in it for your parents as their needs arise. Keeping that money separate from your own funds will help create a literal boundary that you can stick to: if you don’t have money in your “parental support” account, you can’t pay their expenses for them.
It’s not mean. It’s smart financial planning that will keep you from going broke in your efforts to save.
Once you create your separate savings account, set up an automatic contribution each month that your budget can handle (and doesn’t come at the expense of other goals like retirement, emergency savings, or cash savings for things that are important in your own life). It’s much easier to save $50 each month and steadily build a fund you can use to help your parents if and when they need it, rather than trying to come up with thousands of dollars on the spot should they face a bill or expense they can’t manage alone.
If you’re planning far ahead and don’t intend to spend any savings to help your parents for 5 years or more, you can consider opening a brokerage account and investing that money instead. That allows you to put your money to work and potentially earn more than you could if you kept it in a liquid savings account — just be aware you do risk losses if you invest.
Ask Others to Contribute, Too
You don’t need to shoulder this burden alone. Ask siblings or other family members who are financially capable with close relationships to your parents if they can contribute, too. You may not be able to fully fund your parents’ needs, but taking the initiative to plan ahead and request help from others is a lot of work that makes an impact.
Remember that you can contribute outside of just giving money. Offering living arrangements or arranging for chores to be taken care of can be a big help. Taking care of mom and dad’s yard and home yourself (and amongst other relatives) will provide real value for them and keep you from going broke in the process, since you’re not paying for anyone else to do the work.
Decide How the Money Will Be Managed
Before you hand over any funds to your parents, you need to decide on how that money will be spent. Giving them cash and then telling them how to spend it may not go over well, but you can pay bills and other expenses directly.
You can also help your parents indirectly in other ways. You can pay for them to have a financial planner if they have assets but simply aren’t sure how to manage them or a budget in retirement on their own. Or you could offer to pay for a long-term insurance policy to protect them and you from expensive healthcare costs down the road.
Again, this is why communication is key. Set expectations and explain how you’ll contribute before you start and plan ahead if you want to help your parents financially without going broke yourself.