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Trading places - how to cope with supporting your parents financially

Wilson Luna

Thanks to medical innovations, improved living standards and readily available health care, Australians are living significantly longer than ever before; in fact, most people can look forward to living well into their 80s and beyond. While this in itself is a cause for celebration, the downside is that as a society, Australia isn’t financially or structurally able to cope with supporting an ageing community. In 2008 there were five people of working age to support every person aged 65 and over, but according to the 2010 Intergenerational Report, this number is going to plummet over the next 40 years to a mere 2.7 people of working age supporting each of the estimated eight million Australians who will be aged 65 and over in 2050.

With government-subsidised pensions likely to diminish dramatically as the need for them increases, and the fact that many Australians simply won’t have enough superannuation to support themselves in retirement, the responsibility of caring for our ageing population financially is likely to fall on the shoulders of adult children (and, possibly even grandchildren).

When we’re kids we take it for granted that our parents will support us financially, but what happens if the roles become reversed later in life and your parents need you to support them? While it’s something that most of us wouldn’t have to think twice about doing, supporting your parents can place a huge amount of stress on a family – and a marriage. If you’re considering giving your parents or parents-in-law a helping hand financially it’s important to have a strategy in place that will help to reduce the potential for arguments and conflict in the future, and having a plan that everyone agrees to is going to be vital for making this situation work. Let’s take a look at some simple steps you can take that will make the situation easier for everyone:

Talk about it
Your parents may not want to admit that they need help financially, but if you’re noticing telltale signs that they’re finding it harder to make ends meet – like unpaid bills piling up, or that they’re becoming increasingly focused on how expensive everything is – you’re going to have to broach the subject with them. Getting on top of things before they reach crisis point is important, and at the moment they may just need help with covering some of their expenses or finding a reputable financial adviser who will help them to untangle their finances and make the most of what they have. Leave it too late and there may be much higher financial hurdles to overcome.

Set an amount
If, after receiving advice, it becomes evident that you’re going to be taking responsibility for your parents financially, make sure that you all understand exactly what that’s going to entail. Most people won’t be in a position to hand over endless amounts of cash, so get your parents to go through their expenses with you and create a budget that details what you’re going to be responsible for.

Get them to chip in
If your parents live close by and are physically able to do so, see if they’d be willing to help out with childcare in exchange for you helping them financially – most grandparents love spending time with their grandkids and you’ll be able to redirect the money you’ll save on childcare toward helping them out.

Your needs matter too
It’s important that you don’t put your family in financial difficulty so that you can support your parents. If you can’t afford to cover all of your parents’ expenses you have to be honest with them about it and start looking at other options – do they qualify for a pension or benefits? Do you have siblings who can help? Can your parents reasonably reduce any of their expenses? Any of these options can help to ease the pressure on you to come up with money you don’t have.

Easing the financial burden on your parents can be one of the most satisfying things an adult child can do, but it’s important to ensure that it doesn’t have a detrimental impact on your family’s finances or dynamics. Set some simple measures in place and you’ll all be able to enjoy the closeness that’s created when a family works together to help each other.

Author's Biography

Wilson Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration