Loving parents will occasionally help their children in a financial crisis and/or pay outright for certain expenses:
- University tuition and expenses – either through funding RESPs or directly when they are due.
- Help with the down payment on their first home.
- Wedding costs.
- Provide a place to stay when unemployed, divorced, etc.
We also often hear stories about beleaguered parents who continually dip into their bank accounts to keep their fiscally foolish offspring from ending up living in a cardboard box on the streets. They compromise their own lifestyle and retirement to bail out their kids.
But what about when the shoe is on the younger generations’ foot?
What if parents are looking to their children for income?
Is it a moral or ethical duty?
On the surface, many will answer, “of course you should help.”
Some cultures have strong expectations about taking care of aging parents. It’s simply expected that the children will help out.
Helping parents with an emergency is one thing – unfortunate circumstances happen. Repeatedly bailing them out of financial situations they’ve created for themselves by spending like crazy is another, especially when the adult child’s retirement savings is disrupted, or they go into debt to do so.
“I love my parents and want to help, but I don’t want to become their money tree. They think I have an obligation to help them.”
Some people never develop good habits when it comes to money. They live an extravagant life style, fail to plan for the future, and end up with significant credit card debts. When income is reduced at retirement they continue to spend in the same way.
Assess the need
Is it a temporary situation?
Is it a one time loan to pay an expensive medical bill?
An isolated emergency might be a good reason to offer a loan or financial gift.
What if you know your parents are running out of money, but they are still spending as if they’re not?
What if there is an ongoing pattern of dependency and they are repeatedly asking for help because they are making poor choices?
Parents, like everyone else, need to learn to live on their current incomes. As income decreases, expenditures should also decrease, but it can take time for people to adjust their spending. If they can’t cover mortgage payments they need to find a cheaper place to live or downsize to extract equity. They can sell a too-expensive car.
Are they still capable of earning an income to delay withdrawing from a tiny nest egg? Are they choosing not to?
You can research social service agencies to assist them. They may need credit counseling.
Making these suggestions can be difficult, but may be necessary.
If you are feeling uncomfortable or resentful about how much money you’re giving them, it’s a signal that something needs to change. It’s important to work with your parents to take care of themselves without threatening your own financial well-being.
Don’t be made to feel guilty if you feel you can’t help.
This type of situation can be a dilemma.
It’s easy to say they should fend for themselves but this belief is harder to act on.
Few adult children can legitimately argue that their parents did nothing for them.
Related: Are you counting on an inheritance?
If your parents were negligent in their past and present financial decision-making and you had your own family to look after, would you still foot their bills?