When your parents need help with money
Although you hear lots of stories about parents helping to support their grown children, sometimes it's the kids that actually end up carrying the load.
We're not necessarily talking about parents who’ve fallen on hard times because of job loss, disability or ill health.
Often, it’s more about dealing with older people who've simply made a hash of their financial lives – whether through addiction, divorce, or simply poor money management skills — leaving their adult kids to pick up after them.
As a teenager, Taylor Richards (we’ve changed his name but not his circumstances) was aware his parents had trouble managing money. Although both of them worked, they never owned a home and the family always seemed short of cash.
Coming up with fees for sports or school trips for three kids was a constant struggle and unexpected expenses like car repairs really messed things up.
But it was only many years later, after his alcoholic father died, that he finally got a sense of just how much debt his folks had been juggling.
What’s worse, with his mother’s health now a concern, he’s wondering if, by helping out a bit, he’s going to be stuck with that debt if she were to die.
The simple answer is no. People’s debts don’t generally continue to their survivors. But there are things you need to be aware of — most importantly signatures, and who has signed for what purchases.
If the deceased’s debts were exclusively theirs — that is, it was only their account with no one else as a joint holder — the liability ends there. If there isn’t enough money remaining in the estate to cover the loss, creditors will have to write it off as uncollectible.
What you’re liable for is only what you’ve signed for, whether that was as a joint credit card holder when the account was opened or as someone with charging privileges on the card.
But that sort of indemnity is little consolation if your aging parents really are in danger of going under — something that seems to be happening more and more.
While consumers of all ages continue to borrow like crazy, those 65 and older showed the greatest year-over-year increase, at 6.5 per cent, according to recent figures from Equifax, a credit-monitoring company.
That’s not a good sign. Not only do seniors have limited ability to earn more income, but their capacity for change is often limited as well. What’s worse, most are reluctant to discuss money troubles openly.
Some don’t adjust their spending after their spouse dies and pension income declines, for instance. Or perhaps they’re not maximizing government benefits like the Guaranteed Income Supplement and other programs.
If your parent is a veteran, for example, he may be eligible for financial assistance to pay for things like grounds maintenance, housekeeping and personal care.
What do you do when a parent repeatedly hits you up for money? Just say no, advises syndicated radio host Dave Ramsey, the author of The Total Money Makeover — otherwise you could end up subsidizing them forever.
That seems a bit harsh to me, particularly if your parents were previously able to look after things adequately. In fact, a sudden onslaught of debt might be a sign of underlying mental or emotional issues. But Ramsey is a big believer in tough love.
First off, forget about injecting your opinions about your parents into their lives. They really don't want to know. Instead, try something like, “I just can’t do that right now. I’ve got some other goals and some other things I’m trying to hit," he suggests.
If it's behaviour and not simply poor luck, another way to influence Mom or Dad is to find someone who has credibility with them to explain the need to change.
An in-law, co-worker, or a spiritual advisor they trust will have much better luck with a wake-up call than you will. At the same time, encourage them to seek professional help from a financial planner or a credit counsellor.
I think you should only offer to help out of love, not guilt. Either way, though, if you do see the need to jump in, figure out what you — and perhaps your siblings — can actually afford.
If you’re going to pay off a credit card balance, as Taylor envisions, will you then cut up the card? If each child chips in something each month, will everyone be able to hold up their end? How do your partners feel about such an ongoing subsidy?
Whatever you do, don’t let your parents pressure you, Ramsay warns. If you could support them — and you can’t — it wouldn’t be right for them anyway. They need to learn to take care of themselves, he maintains.
Got a question about investing, saving or retirement? Send Gordon an email and we might answer your question in a future column.
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