Saving while Helping your Kids & Parents

By Lucy Stewart, a financial counselor
for families looking to get out of debt

Forty-eight percent of middle-age adults provided support to their adult children in 2012, which is up from 42 percent in 2005, according to PewSocialTrends.org. Also up is the financial support they provide their aging parents: 21 percent said they provided some financial support to a parent age 65 or older in 2012, up from 19 percent seven years earlier.

Offering financial support to your adult children and 65+ parents does not mean that you give up your own financial plans and dreams. Family is family, but sacrificing your personal well-being won’t benefit anyone. Look for ways to cut expenses and create streams of income, and don’t assume you have to do this alone.

Reduce College Expenses

Your college-age child can’t afford to live on campus on their part-time salary, and one of your conditions for support during this tough time might mean giving up some things he or she cherishes, like switching schools or moving back home.

In-state colleges are less expensive, and if you live close to one, your children can live at home, and help out around the house. Every college-bound student should apply for financial aid and, if you can justify the expense, meet with a college financial planner who can direct your student toward pockets of money that might have been missed otherwise. Many offer free initial consultations. Ask your school guidance counselor to recommend financial planners, and interview several until you find one with whom you are comfortable. If your children’s high school holds a college fair, you’ll find this a great opportunity to meet these advisers. College is going to be expensive no matter what, but putting your money where it will provide you with the best benefits should always be your focus.

Inventory Your Parents’ Assets

Bloomberg Businessweek suggests consolidating your parents’ assets in one place, which means gathering up all credit card, bank and investment account information and putting it in one location; it doesn’t mean putting all of their dollars in one account.

According to the company J.G. Wentworth, if you or your parents are collecting structured payments from an annuity, you or your parents might be able to cash them in for a lump sum sooner. But use the money wisely and make sure the ends justify the means. Giving up those future payments means a loss of an income stream, but if it helps the three generations meet living expenses, it might possibly be worth it. Do this before you consider dipping into your retirement account.

Other Money Tips

• Make sure your parents have insurance. Your parents need long-term care insurance or life insurance with a long-term care rider. Start with longtermcare.gov to find services and to estimate costs in your parents’ state. This will help cover your parents if they need in-home or facility-based long-term care, which Medicare does not cover. The younger they are, the lower their premiums will be.
• Meet with an attorney. Consult an attorney who specializes in elder law and establish a durable power of attorney, health-care directive and update everyone’s wills. A durable power of attorney allows you to take care of your parents’ financial affairs if they become unable to. Similarly, a health-care directive gives you (or whomever they designate) the power to make health-care decisions on their behalf, if they become unable to do so.
• Keep taking care of yourself. Just because you have to pay for your adult children and your parents does not mean you stop paying yourselves. Set up a separate savings account for your “fun fund.” Eventually, you’ll need a break. You can save for a specific activity, vacation, new TV or whatever your fun goal may be. Sure, it might add up slowly, but patience will get you there.