7/19/2011 6:29 PM ET|
Are you your parents' ATM?
Sometimes a parent may come to you for money, especially if retirement expenses are unmanageable. If you can afford to make the loan, there are right and wrong ways to help.
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.
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.
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My dad has filed BK twice in 20 yrs. I blame his wife's various snooty habits & inability to keep a real job. Never was an issue before he married her 25 yrs ago.. Always had lots of money, cars, planes, vacation homes.
Borrowed money from my brother to buy a house in Vegas (HA!) at the peak of the market, he paid it all back (early) but it trashed that relationship & now the house isn't worth the paper the Deed is printed on.
He needed $5K to lawyer up for this recent BK. I'm not going to jeopardize my safety net so you can keep two horse "dogs" & dine out @ Alise & the wife hitting QVC instead of getting and keeping a job.
When it came to my mom, I had to stop giving her money a long time ago, or she would have bled me dry. She would do things like just stop working ( Not laid off. She would stop working.) for months, then call me for money. She would lie about her situation. I would give her money, then she would hand it over to my perennially out of work brother and SIL or a ne'er do well boyfriend. She sees the few employed and responsible in our family as cash cows. The way her world works is that she is supposed to do whatever she wants, not work, sit around and watch television all day, drink, and we're supposed to pay the bills "Because she's our mother." I have my own family to care for and protect. That is where my resources should go.
Worst advice I've read in a long time. Every circumstance is different. Paying anyone's bad habits is not helping or taking care of someone, it's stupidity but insuring your parents have the same benefits of food, clothing and shelter you had growing up, that's love and being a responsible family member.
I constantly hear people say they will buy a homeless person a meal but won't give them money, a great principle to be used here too. If you really need help, you take the meal.
p.s. For years I've had a bumper sticker that reads: "My kids think I'm an ATM" hmm...
irrational spending is a sign of dementia? i never heard that one before but it makes sense- personal observation tells me that heavy set people who cannot control what goes into their mouth generally cannot control what they spend on junk they do not need with money they do not have -
lack of control in one area usually means lack of control in many areas , including spending, overeating and the need to get even with folks they percieve to have slighted them in some manner-
drama queen tactics are used to make normal, hard working , people feel obligated or guilty about not giving in to their histrionic , narcicistic ploys to have everything handed to them on a silver platter- this applies to parents, relatives and so called friend who try to bleed you dry- once you let them get their hooks into you, you are a target for life-
i say, let them handle it on their own- it is not my job to live in a tent and eat dog food so you can have a massage or a manicure with the money i sent for groceries on the few dollars i have saved for my own old age- why should i do without my NEEDS so you can finance your WANTS?
That's right to each its own . SO MANY people think they are giving you good advice, but you know in your heart what the right thing to do is . But , you try to find someone to agree with your poor decisions so you can feel good about a bad decision.
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