Many children are willing to assist their parents as caregivers and also financially if needed. That said, helping a parent financially can create financial and emotional stress on both the parents and the adult children. It may even create an environment in which their own goals are delayed. A few proactive financial steps can make a big difference in reducing financial stress and putting family members on a path toward greater financial well-being.
Having candid conversations with family members can be challenging, but they are necessary. One of the first steps is to identify why you are providing support. Is it an ongoing issue, a significant life event like a medical issue, or a constant stream of “emergencies”? If you provide ongoing support, establish a routine around money discussions and make it non-confrontational. Establish timelines around your parents’ needs and goals, as well as your own.
If your parents are able, have them organize their financial account statements, legal documents, locations of safe deposit boxes, or other important paperwork. This can avoid detective work later. If your parents are unable to help, start looking for the most important paperwork first in case you need to take over some financial responsibilities.
Important documents may include financial, legal, medical, insurance, and advisor contacts, as well as the location of records like real estate deeds or safe deposit boxes. If your parents are receiving Social Security benefits or need to make Medicare decisions, you will need their related paperwork to help with that as well.
If you need to step in to help pay bills and cover day-to-day expenses, knowing in advance where related paperwork is kept and which bills must be paid first can help reduce stress.
Whether your financial support will be short-lived or long-term, take a look at your household budget. If you are providing ongoing financial support, see if there are opportunities to reduce nonessential expenses. If you don’t have a budget yet, assessing the cash flow can be a good starting point. Look at recurring monthly necessities like housing, transportation, and food. Remember to include the irregular expenses that come up during the year, like buying tires or paying property taxes.
If you or your parents have debt, make a plan to get the debt paid off so that the money can be used for other goals. Try avoiding taking on new debt to help your parent, which could have a lasting effect on your finances.
Budgeting can be as simple or complex as you need it to be. For help with budgeting, talk to a Money Coach.
Write down short, intermediate, and long-term goals for you and your parents. Your goals might include things like saving for retirement, buying a home, or even planning a vacation. Your parent’s goals might include planning for a move to an assisted living facility or paying off a medical bill. Work with your parents and focus on what is needed.
If you are already in the habit of funding goals on a monthly basis, congratulations! If not, ask yourself whether you are on track for the goals that are most important to you. If you’re off track, identify what is getting in your way and how you might change that. Ensure that each goal with a financial component is accounted for in your monthly budget.
Start building an emergency fund. Challenges, whether expected or not, can have a negative impact on your finances. If you save for unexpected expenses, it can help you avoid the risk of relying on credit cards and consequently building debt or derailing financial goals.
When caring for aging parents or grandparents, discuss their insurance policies, asset and account statements, and estate planning documents. Understanding what kind of coverage they have can help you determine if it is enough for their current and future needs.
Especially as a caregiver, it’s vital to consider whether you and your loved ones will be covered financially if you become disabled and require assistance. Consider protecting your household income with a disability policy and consider life insurance for you and your spouse. Talk to your HR or Benefits Manager about employer benefits and tax savings that may be available to you and your family.
Also consider legal documents such as wills, trusts, and advance medical directives to make your own wishes clear if something happens to you. Talk with an attorney to determine which documents may be best for your situation.
If the situation feels overwhelming, we encourage families to seek help from behavioral counseling professionals through their Employee Assistance Program or local resources. Employee Assistance Programs may also have legal referrals available.
For resources for an aging parent, check out the Eldercare Locator – a public service of the U.S. Administration on Aging that can connect you to services for older adults and their families at 1-800-677-1116 or eldercare.gov.
For information about Medicare options and publications, visit the Medicare website: medicare.gov. The State Health Insurance Assistance Program is another resource and can help with navigating Medicare – for details, visit shiphelp.org.
For Social Security issues, questions, and benefit planners, visit ssa.gov.
At MSA, we want to help you be proactive about finances with your family members. Consider working with a Money Coach who can provide further steps on how to make finances a positive part of your relationships.
My Secure Advantage, Inc. or any of its representatives do not endorse any of the websites or company names listed here.
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