4 Ways to Help Parents With Financial Struggles

As children, we’re hardwired to see our parents as invincible. It’s usually not until adulthood that we really understand our parents’ flaws and vulnerabilities, especially as they age. Money problems give us a unique opportunity to see the simple truth—parents may need help, too.

If your parents are having trouble managing their money, it may be time to step in. If they are struggling with expenses, giving them money may not be the best way to help. It only solves the problem temporarily and ignores the underlying issues.

You may be able to help them develop strategies and knowledge to make better financial decisions. That means teaching them to identify and address problems before they turn into emergencies. It could also mean taking a more active role in their finances.

Here’s how to help your parents without compromising your own situation in the process.

1. Meet with a Financial Planner

It may be difficult for parents to talk about money or accept help from their adult children. That’s why it helps to bring in an expert with an outside perspective.

Set up a meeting with a qualified financial planner to examine your parents’ finances and prescribe some advice. You may find one through the National Association of Personal Financial Advisors.

Make sure you vet them first and verify that they’re a fee-only planner. This type of advisor has a fiduciary duty, or legal obligation, to give impartial advice. They don’t earn money on commission so they won’t try to sell your parents annuities or insurance products, which may not be appropriate. It may be helpful for you to attend the initial meeting, depending on whether your parents are comfortable with it.

2. Keep an Eye on Their Credit

If your parents have a history of opening new credit cards or taking out loans but want to stop this pattern, you could suggest that they freeze their credit. It may be an uncomfortable conversation, but try to explain how a credit freeze will take away the temptation to damage their financial situation further.

A credit freeze prevents someone from opening a new credit line. This includes credit cards, personal loans, auto loans and more. They also won’t be able to ask for a credit limit increase on their existing credit cards. One added benefit: This also prevents scammers from stealing your parents’ identities to open credit in their names, as older adults are often the target of financial exploitation.

If you don’t have financial power of attorney designation with your parents, they’ll have to initiate the freeze themselves. To start the process, go to the three credit bureau websites: Experian, Equifax and TransUnion.

When you freeze a credit profile, you’ll receive a PIN or numerical code to undo the freeze later. Make sure to keep this number safe because it’s challenging to thaw credit without it.

3. Help Them Lower Expenses

Walk through your parents’ current expenses to identify any obvious ways to save money. Cancel any accounts your parents don’t use or don’t need. They could be overpaying for the following expenses:

• Cable

• Car Insurance

• Cell Phone

• Gym

• Other Subscriptions

• Internet

Contact those providers and see if there’s a way to lower the rates or choose a cheaper service. They may be eligible for applicable senior or veteran discounts.

Then look at their current debts and see if they’re eligible to refinance any loans. Ask if they’d be willing to sell their home and downsize to a smaller property. The profit might pay off remaining debts or help your parents save for future expenses.

4. Offer to Manage Their Finances

If your parents are really struggling or want you to step in more aggressively, offer to manage their finances yourself. This may be time-consuming at first, but ultimately cheaper than lending them money.

If they agree to relinquish control, ask them to make you their financial power of attorney. This will allow you to make decisions on their behalf more easily.

• First, you’ll need online access to their bank, credit card and retirement accounts. You’ll also need to log onto bill accounts like utilities, internet and streaming services.

• Next, set up a separate bank account where you’ll deposit money for living expenses like groceries, gas and small discretionary purchases. Set up automatic monthly deposits, like a paycheck.

• Finally, open another bank account for both regular bills and major expenses like medical bills and home repairs. This account may include Social Security, annuity and pension checks. From there, disburse money to their discretionary account.

Some parents may find a spending allowance demeaning or a threat to their autonomy. Still, others may be willing—especially if you’ve previously helped them with managing their finances. Ultimately, it’s up to your parents to decide how much help they’re open to receiving.