Will your parents’ financial decisions leave you holding the bag?

by Millionaire Mommy Next Door on March 26, 2009

in About Me,Giving,Raising Money-Smart Kids

Emma Johnson from MSN Money pitched me the link to her recent article, Will you end up supporting your parents?, and I have to confess, her article brought up very uncomfortable memories for me.

15 years ago, my mom and I started having conversations about how she planned to handle her retirement. She’d admittedly not been very savvy about her personal finances. I was often concerned about her financial misbehavior. Deep down, I knew she was counting on someone to rescue her: either a man or me.

My mom and I would often brush the tension away with good-natured ribbing. We used to joke about how when she was broke and too old to work,  my husband and I would build her an apartment in the hay loft above our horse barn, and when she became too old to climb the stairs, we’d haul her up with a hoist and pulley system. That was good for a few laughs — until she turned 59 and was diagnosed with a debilitating disease that forced her into early retirement.

She lost her business, her ability to work, her minimal home equity. With no savings set aside, she quickly became dependent on others. The stress of her illness and the burden of her financial needs ravaged the relationships between her and her boyfriend, and me and my siblings.

In her article, Emma Johnson asks difficult questions:

Will your parents’ financial decisions leave you holding the bag?

Is it ever too early to meddle in your parents’ financial affairs? Is it your responsibility to plan to care for people who are still working and able to save and invest on their own behalf? What if their financial needs compromise your lifestyle or your security? And what if your folks should have known better than to leave retirement to chance — and yet have?

Ultimately, my mom’s poor financial behavior became our burden, and while I was glad that I was able to help her, the situation caused undue stress.

Many of my coaching clients are parents raising young children, are deeply in debt, and have little or no money set aside for retirement. Yet most of these parents contribute regularly to their children’s education fund(s). While I appreciate the desire to provide their kids with a college education, I worry about their family’s future in the long run.

Take it from me — the financial burden of caring for your elderly parent(s) — ones who failed to save for their own retirement — is much more daunting than paying for your own college tuition.

So parents, please take care of YOUR financial future first. Then — and only then — contribute towards improving your children’s future. This is not selfish behavior; this is one of the most loving things you can do for your entire family.

{ 17 comments… read them below or add one }

dogatemyfinances March 27, 2009 at 8:47 am

Thanks for this article. My parents have had a don’t ask-don’t tell arrangement for a long time. It’s clear to me that we need to discuss this like adults just to figure out what is going on.

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mjukr March 27, 2009 at 9:13 am

GREAT post. I have to agree, I will only be putting aside money for college if/when I am sure that our retirement needs are adequately met! I made it through college without parental assistance (and am now debt free), and I think I took my education more seriously because of that. So many teens seem to just expect that they’ll go to college without any understanding of the financial impact/requirements!

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Revanche March 27, 2009 at 11:28 am

Absolutely right. If my parents had spent more time preparing for their future instead of promising to support my college years, they might have had some resources to draw upon when my mom became too ill to work. Certainly there were some other bad decisions as well, but that was the worst. And I’m finally learning the reverse as well: I can’t keep taking care of them unless my financial position is stable. In that respect, theirs is a legacy I do not want to pass on to my children.

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Debbie March 27, 2009 at 12:10 pm

Excellent post and hopefully will make people really think about where the funding needs to go. I was lucky in the fact that both of my parents were very mart with their money. They both purchased items after having saved for them, paid off their homes early, saved for retirement and made worst case plans just in case. They taught me to be smart with my money and to save. My husband’s family is the complete opposite and I have had to flat out tell him I will not be supporting his siblings or mother when they get old. He completely understands and his family has no idea just how well we are doing with our savings, retirement and investments.

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Camilla March 27, 2009 at 12:57 pm

Beautiful & Powerful Post! Thank you so much for this ~ it gave me goose bumps!!

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Steve March 27, 2009 at 1:48 pm

I agree with the premise that a person’s retirement should be taken care of before saving for a child’s education, but saving enough for one’s own future seems to be a moving target.

When does a person ‘have enough for retirement’? I am 27, with a 6 month old baby. Besides $15,000 in student loans (@ 2.6% interest rate), and a mortgage, my wife and I are debt free. We contribute to our 401k’s up to the match, and we contribute $100 a month to a Roth IRA. Since we are so young, we feel secure in our ability to save enough for retirement, so we also contribute to a 529 plan for our child.

Even though we feel secure, anything could happen at any time. Maybe one of us gets injured, and we can not work anymore. Maybe this happens to both of us. We never know, therefore I am inclined to save more. But when is it enough? If I max out my 401k, is that enough? I am 27…I may have 60 years of life left…$15,000 will not be enough if something happens next year.

I struggle with the concept of taking care of myself first, then take care of others, when there exists so many potentially negative unknowns. If I am not saving for my daughter’s education…should I not be giving money to charity? Take care myself first, right???

What is the sweet spot for annual saving for yourself, vs saving/giving to others?

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GoEverywhere Team March 27, 2009 at 3:29 pm

Really appreciate this post, because it has caused me to think about my impending situation on both ends of this spectrum.

I had never considered the fact that it may be much more in your child’s interest to take care of your retirement needs before taking care of their educational needs. In the end, it really will be much less stress on them.

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FANDD March 28, 2009 at 2:08 pm

I totally agree that parents should plan for retirement before planning for their children’s education. My parents took this route and I am incredibly grateful that they did. My sisters and I grew up lower-middle class, went to public school, did not have any lessons and did not go away for summer camp.

I ain’t gonna lie. My parents were cheap. I didn’t like it. My sisters and I learned that a sale meant 75% of the clearance ticket. Mom cooked every night except for Friday night pizza and Sunday dinner. Entertainment was the dollar movie.

Here was my parents’ college plan – you pay for a third, you borrow a third and my parents would pay for a third. If you got a full scholarship then you got a car when you graduated college. Knowing that I was responsible for 2/3s of my college costs did affect how I chose my school.

Now my parents are retired. Dad has his military pension, his private company pension, social security and his investments. Mom retired from retail, took a lump sum payment (which dad is investing) and went back to work 2 days a week to have something to do. Their house is paid for. They have no debt.

When my dad was diagnosed with prostate cancer, I only had to concern myself with getting my dad well and keeping my mom from freaking out. Now that was a blessing and the best gift that my parents could have ever given to me.

Looking at this from the other side, taking care of your retirement really is taking care of your children.

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dk haas March 29, 2009 at 4:39 pm

Thanks for the post. My mom recently passed away and was laid out in a cardoard box before her cremation because my parents spent all their money, rather than save for thier retirement. My dad is still living but may lose his house because of his poor savings plans. This is heartbreaking to witness.

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cy March 29, 2009 at 11:41 pm

I agree with you – my parents didn’t save anything for their retirement, did not purchase health insurance. Their retirement plan was relying on their two children to support them. Unfortunately, they didn’t save any money for my college (my older brother had his mostly paid for), so it was very difficult when I got my first job and was expected to pay off school loans, support myself and send money to the parents at the same time. When dad (whom I miss very much) had cancer and eventually passed away, that was also a big financial hit.
It’s actually turning out to be a bit of a handful, supporting mum, my family, and saving for our retirement – I fear I am not contributing enough to my kids’ future college fund. But I hope I can teach them to be frugal, sensible about money and self-supporting, all the while not being a burden on them in the future.
The funny thing? My parents had their school paid for, their first home bought for them, nice cars and country club membership. I know they must have spent a fair bit of money raising me and feeding me and stuff (and no, I didn’t go to private school – but raising my own kids, stuff’s just not that cheap) so I am very grateful, but I am determined to save for my own retirement ahead of various and sundry luxuries now.

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Marya March 31, 2009 at 4:41 pm

Very sobering. I feel like I’m between a rock and a hard place with debt, kids to raise and no money to save for the future. I am working hard on educating myself though and I hope that will change.

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tom April 3, 2009 at 11:02 pm

Thank you, really this is such a great article because I can totally relate to this.
It only started to hit me recently what kind of mess I am in myself but what kind of mess my parents are and the future facing them and me eventually.

Yeah i love my parents for what they have done but they need to think logically and stop putting themselves in debt, I mean I am an adult now, so treat me like one.

I mean how do you expect me to go out in the world with bad habits, or habits like you have.

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Millionaire Mommy Next Door April 6, 2009 at 2:47 pm

Steve, I responded to your comments and questions in a new blog post. See:
http://millionairemommynextdoor.com/2009/04/plan-a-and-plan-b/

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jd April 14, 2009 at 4:01 pm

This is a great post. I am in a situation where it is my in-laws who are not financially stable. My father in-law lost his job a few months ago and just recently my mother-in law was diagnosed with leukemia. They have no health insurance, life insurance and no savings. The only money they have is my father in-law’s retirement which they are living off now. They are also about to lose their house. I am stressed about this situation because we are young newly weds and I fear that we will have to take care of his parents in the near future- possibly living with us. My husband and I are dealing with our own financial responsibilities so this is definitely a stress in our lives. We can deal with our own finances but I am afraid we’ll never change our “family tree” financially if/when we have to help my in-laws. My mother in law will not be able to work for a year on the advice from her doctor and my father in law only has a high school diploma so finding a job has been difficult. They aren’t getting any younger but they aren’t old as well- about mid 50′s. I don’t know what to do or where to go for advice on the best way to handle this situation. What has also been difficult for me is how to communicate with my husband on how I am feeling and how best to prepare for this financially. I am also dealing with the guilt of feeling bitter towards his parents because we will have to literally pay for their financial mistakes. So yes- best advice for parents- be wise with your money and please don’t make your retirement plan your kids. And if anyone has any advice on the best way to handle this it would greatly be appreciated.

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sb April 20, 2009 at 2:35 am

Thank you for writing this article. I recently graduated from college and I am fearful on what effects my mothers spending habits will have on my brother and I in the future. After my mother divorced my father she just started a run of irresponsible spending sprees. She was close to paying off the mortgage on the house, but continued to refinance and did not invest any of the money into the house. Any money she got she spent on useless stuff and eventually she couldn’t afford her mortgage payments. She sold the house and did not get a quarter of what the house was worth after paying the bank back. Now she has this lump sum and is continuing her spending sprees.

I created financial plans and set appointments with financial advisors, even before she ever was going to sell the house, but she just ignores me and has always ignored me. She is also not working. When I tell her she is not going to have enough money to retire she just says that I will have to take care of her. Her retirement plan is that either some man or I will take care of her. She didn’t pay for my college and now I have 30,000 of debt that i am trying to pay off. I often feel as if my hands are tied because I know she will run out of money if she doesn’t do something but she never listens to me. I just graduated college, yet I am filled with anxiety about where my mother will be in the future and if I will really be able to have the means to support my future family.

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Mick September 3, 2009 at 12:34 pm

My father who is cancer ridden and going through chemo/radiotion is finacially broke his mobil is up for sale. After my mother passed away he had income and business, and means. After my mother passeed he sold the house went on wild spending psrees , played the field and evcentually is broke now looking of help. I amd my family did not approve aof all theother females he wnet out with and told him so, but naturally he ignored me.Ihave recently 6mths moved him in becsue no one in the family wanted him because he was broke now and now my husband and I are running him back and forth between doctors , paying for medicines that his insurance cant pay and everday household expenses. We basically have been left holding the bag, resentful as hell but still l feel obligated now. He partied like no other and used and lied to me. I want to just say you have to leave but then there is the he is my father issue, I wish he prepared better and ignored the women who he thought love him.
For future reference I wish my mother would have had a trust that would have given me right to how he spent all the money instead of all the spending sprees and wild women who were after one thing his money. Widowed, broke father who I have to take care of and his bad desicions. So please insit that you ask your parent how they have to pay for there retirment. If not telll them you will not help them maybe that will make them think about there choices.
I am trying to put away for my retirement but its almost like his expensies is tapping into my donations to my retirment.
Angry and hurt/ resentful Daughter.

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ruzica April 19, 2011 at 10:17 pm

Boy, all of these comments have hit home. My mother died unexpectedly two days ago, my father has no money to live in the house he has loved and maintained for 50 years. My mother spent very irresponsibly for about 10 years, filed for Chapter 13 and now still owes quite alot of money. Unfortunately, in her passing, she has left my father financially poor and we will have to sell the house. Together they spent much money on travel, amendities, vacations, items that still have tags on them. I think my mother just didn’t care; she thought her 6 children were going to take care of whomever died first. Well, all of my siblings have been very responsible savers for our future. We have college degrees we paid for, have college educated children, and have retirement savings; the best we can give our children for our future and theirs. For anyone reading this comment, saving for your retirement is protecting your children from financial burden and hardship. Don’t let your retirement be your children’s burden!

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