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Should you float Mom and Dad a loan?

If you can do it without ruining your own finances, sure. But writing a check for Mom's car payment could be like slapping a Band-Aid on a chest wound. You might be treating the symptoms, not the cause -- and your treatment could be meaningless.

"If I give you money and you have a spending problem, I didn't help you," says financial guru Dave Ramsey.

A reader named Nicole learned this the hard way. Shortly after her parents moved to their rural dream home, her dad got fired. After more than $8,000 worth of bailouts, Nicole and her husband closed the bank. They invited the parents to move in, but the older couple wouldn't leave their home or get rid of their horse, goats or fowl.

The reader, who asked that her last name not be used, says her folks now take money from her two siblings -- neither of whom can truly afford it.

"It's 'Oh, we're your parents; we're in such a bad situation.' But I keep thinking this is going on much too long," Nicole says.

Image: Donna Freedman

Donna Freedman

A growing trend

The percentage of bankruptcy filers age 55 or older nearly tripled, to 22%, between 1991 and 2007, according to a study from the AARP Policy Research Institute. That increase was far sharper than the rise in the 55-and-over population during the same period (the portion of the U.S. population 55 and over went from 19% in 1991 to 23% in 2007).

Many people who thought they'd saved enough watched their retirement funds shrivel during the economic downturn. Some are going back to work, if they can get hired. Others ask their sons and daughters for loans.

"There's a lot of shame when our children become our parents," says Philip Dembo, a therapist and life coach in St. Louis.

Although you should acknowledge how hard it might have been for your parents to ask, you should never make a loan you cannot afford.

"It doesn't mean you stop caring about people," Dembo says. "But you take care of yourself first."

Saying no to a parent isn't easy. Many children wouldn't dream of it, especially if the shortfall is due to job loss, illness or a shrunken retirement fund.

But what if the wolf at the door is actually a FedEx delivery driver, a cocktail waitress or a casino pit boss with a fistful of markers? If you're enabling a parent's addictions (chemical, shopping, gambling), you're hurting, not helping.

Wealth psychology expert Kathleen Burns Kingsbury suggests offering help instead of a bailout. For example, you could decline to pay a credit card bill but offer to pay for 10 sessions of therapy for a compulsive-shopping problem.

"It may be that you can negotiate something where you're helping, really helping, instead of supporting unhealthy behaviors," Kingsbury says.

'We just want them safe'

Not every parent who overspends is an addict or a moral weakling. New retirees may find their lowered incomes aren't keeping pace with inflation. Maybe they're lonely and want to be where other people are -- malls, bingo parlors or other places that end up costing them money.

Or maybe your parents never learned how money works. Ellen, who lives in the Southwest, has watched her in-laws make questionable choices, including cashing in retirement funds and buying furniture and appliances rather than paying off their mobile home.

Her mother-in-law was disabled by heart disease a few years ago. Her father-in-law has been unemployed since 2007 except for sporadic contract work. Recently, they couldn't pay for illness-related items, including medication. Ellen and her husband sent money immediately. They're prepared to send more.

"We would have to find room in the budget," she says. "But it is frustrating when we look at their past of spending and not saving."

Ellen and her husband had been saving for a home of their own. Now the goal is to find a place with room for the in-laws. "We just want them safe," she says.