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FAMILY

Are your parents sponges? How to regain financial control Add to ...

If we’re lucky, our parents will be able to attend weddings, grandchildren’s births and maybe even the odd shared vacation.

But some adult children are sharing more than that with their aging parents. They’re handing over money.

Ask Cherise Berman, a financial planner at Bespoke Financial Consulting Inc. in Toronto, who receives calls from people looking for guidance when it comes to supporting elderly parents.

Not long ago a client expressed concern over a free-spending mother. Although the retired parent had some savings to draw from, her daughter worried it would be depleted within a year or two. “She asked, ‘Once that money is gone, am I going to be able to continue the ongoing care for my mom?’” Ms. Berman says.

Canadian statistics on parental financial support can be hard to come by, but according to a TD Ameritrade study in the United States, 13 per cent of Americans support aging parents, compared with 10 per cent supporting adult children.

Financial supporters are almost twice as likely to support a mother as a father, and they give mom about $5,000 more than dad a year.

Rick Lauber, the Edmonton-based author of Caregiver’s Guide for Canadians, says that too many adult children still don’t consider how caring for an elderly parent will have long-term financial implications.

“People just don’t like to think or plan ahead and discuss the need for long-term care when they’re young. It’s simply out of sight, out of mind,” he says.

Janet Gray, a financial planner in Ottawa, says she sees this situation play out most often with sandwich-generation clients who are 55 and older and supporting both children and parents. The financial load can be substantial – some are subsidizing their parents’ income to the tune of $1,000 a month. And they are likely trying to play catch-up with their own retirement savings.

“Of course, people support parents willingly, but yeah, just as they’re hitting their high spending/saving cycle, there is this little kink in the road,” she explains.

In some cases, it’s more than a kink. According to the TD Ameritrade data, a fifth of financial supporters had to dip into savings to provide financial help (this number includes parents who support children, too). What’s more, they held an average of $22,000 in unpaid debt as well.

How to ease the burden? Here are ways to alleviate your folks’ cash crunch without getting sucked into a black hole of debt along the way.

Start talking now

Ms. Berman says she is sometimes asked by adult children to create a financial plan for their parents. “They’re anticipating that the parents might be spending too much, too soon,” she explains.

By planning together now, parents and adult children can start difficult conversations early, when everyone is still calm and big spenders are less likely to be on the defensive.

What if you discover that you will likely have to help your parents make ends meet someday? Take a look at your own expenses and see how much you can afford to start saving now. Even socking away a hundred dollars a month for five years can make the difference to elderly parents if they need emergency funds for a new washing machine, furnace or roof.

Tread carefully

Most parents don’t want to ask their kids for help, unless the family belongs to a culture that treats caring for blood relations as the norm. Many parents want to be independent; pride and embarrassment get in the way, too.

So while it may be important to ask tough questions about where parents’ income is coming from and how they’re spending it, a bit of finesse goes a lot way. Focus on what matters: working together to keep mom from running out of retirement money too early.

Ms. Berman remembers one family that helped a retired parent get over the embarrassment of asking for a handout by hiring her to do administrative work for the son’s business. “It’s a win-win for everyone,” she says.

Give time, not money

Not everyone can afford to take over a parent’s cable bill and car payments, but some can give the gift of time.

Mr. Lauber says that while he and his two sisters co-cared for their parents more than a decade ago (their mother had Parkinson’s disease and leukemia and their father suffered from Alzheimer’s), he volunteered to be their chauffeur for doctor’s appointments and shopping trips, rather than paying someone else to do the job. The family provided a stipend for fuel and parking costs. “It was much more cost effective,” he says.

Even so, Ms. Gray cautions that a time commitment can still have long-term consequences, particularly for offspring who are entering their top earning years. She recommends joining forces with siblings if possible and even drawing up a schedule that outlines who takes mom to the doctor’s office on Tuesdays and the library on Thursday evening.

There are no easy answers, especially if siblings are far flung or estranged from the parent, but having frequent conversations is important. If disagreements arise, consider asking a third party, such as a financial planner, to sit in on the meeting or call.

Focus on what’s important

Mr. Lauber says that working through thorny issues with his sisters actually brought them together and made them closer. So even though it’s common for family members to have different ideas about how to help a parent who is slowly going broke or is in urgent financial need, simply admitting that the family is making difficult, emotionally draining decisions can help everyone cope.

“It helped that we all focused on the end goal,” he says, “which was serving mom and dad and providing for their needs and best quality of life.”

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