Pattie Lovett-Reid: The bank of sons and daughters
My parents made it very clear early on in our adult life: don’t expect major financial gifts from us and don’t ever expect us to be a financial burden on you. In some ways, that was the greatest gift my parents could have given us.
What I’ve come to realize not all families are so lucky, and while you might not think you have to worry about your parents’ financial situation, you may find yourself compromising your lifestyle for their bad habits.
There are many parents out there who don’t have a nest egg, haven’t saved enough for retirement, or may be dealing with health issues where they need financial support. It is very tough for a child to turn a blind eye, no matter how frustrated by the situation he or she may be. They are your parents.
If you find yourself in this situation or even suspect it, the earlier you have a financial conversation about the "bank of sons and daughters," the better. Open up about your finances and ask them to do the same. You need to know where they stand and what their plans are for the future. Suggesting they save money isn’t likely to have any sort of impact, but involving an advisor or third party might make a difference.
This isn’t simply about giving your parents money, and if you do, don’t expect it back. However, here are a few tips to manage becoming the "bank of sons and daughers"
1. Understand their cash flow and what they are spending their money on. Highlight any unnecessary expenses.
2. Explore the Canada Caregiver Credit and determine your eligibility to claim up to approximately $10,000.
3. If they have a portfolio, explore whether it is appropriate for their age. Have they taken on too much risk trying to make up for lost time in the markets?
4. Don’t be too quick to co-sign on any debt instrument. You could find yourself on the hook for your parents’ debt, medical bills, or their mortgage in the event they default.
5. If finances allow, you may decide to buy their home. The result is you own the asset while giving them lifetime access to it. Ideally, they can handle the ongoing expenses and taxes.
6. You may need to bring in professional help. This is more common than you think.
Money and family is such a touchy subject at the best of times, but if your parents’ financial situation potentially could impact yours, it is likely time to get involved. If you have siblings, they too need to step up to the plate. You shouldn’t be in this alone.