What to Do When Your Parents Are Poor Money Managers

With 80 percent of Americans currently in debt, it is clear that many people struggle with their finances. The reasons for this include but are not limited to; not having a budget, over spending, get rich quick schemes, lack of financial knowledge and getting into debt.

Almost 90% of baby boomers and 80% of Gen Xers are in debt. If your parents are bad with money, you have probably experienced one or more of these scenarios;

  • They make unnecessary purchases with their money. 
  • They keep calling you to bail them out of every bad financial situation. 
  • They borrow money from you and never pay you back. 
  • They buy stuff on credit and expect you to pay for them. 
  • They ask for money for food and utilities. They instead use it to play bingo and buy collectibles at the flea market. 

Here’s how you can help them out.

Don’t ignore the issue

Even though this situation is frustrating, you may not want to cause any awkwardness in your relationship. So, you may try to ignore it. Afterall they are your parents. They raised and took good care of you. They made sacrifices for you and said that your dreams were valid. They came to all your soccer games and piano recitals. They said you could be anything you wanted to be. In fact, you wouldn’t be this person today if it wasn’t for your dear loving parents.

However, your parents’ poor money management is affecting your life plans. You have to keep paying off their debts and covering their expenses. Eventually, you keep putting off buying a house, getting married or having children. With their demands and your own student loans, you cannot afford it. NBC news states that millennials are putting off these important life milestones due to the financial load they have.

The longer it takes to deal with it, the more resentful you may become. Eventually, it may turn into a never-ending cycle. The following suggestions will help you to handle this sticky situation smoothly:

Start the Conversation

Money management is a sensitive subject for most people. In fact, 44 percent of Americans find that discussing finances is as difficult as talking about death. This is according to a survey done by Wells Fargo. Money has been a leading cause of strife among friends, family members and spouses. 

Your parents may not tell divulge everything you need to know at first. No parent would want to be looked at as financially irresponsible. They want you to admire them.

However, having an open and honest discussion with them is beneficial. Be tactful and respectful in your approach. You could break the ice by opening up about your own finances. They will be encouraged to listen and share as well. Whether your parents are still earning a living or not, some important issues need to be addressed:

  • Are they saving for retirement? 

Find out if they have a pension. Ask them if they each have a 401(k)? How much do they have saved? Is it enough to pay for their lifestyle and other expenses when they stop working?

  • Do they have a budget? 

Are they following a plan for their daily expenses? Do they spend whatever they earn without limit?

  • How much debt do they have? 

Do they still have student loan debt? How about credit card debt? Have they paid off their mortgage? Who else do they owe money?

  • What are their plans for long-term care? When they much older, where will they live? With you or in a home?
  • Do they have a written will? 

Are their wills updated? Do they have a power of attorney? Do they have each other’s bank login details?

When asking these questions, make sure they are open-ended so that you don’t sound interrogative. For example, ‘Where are your financial accounts?’ or ‘How long ago did you update your will?’ This approach is more likely to get them talking than with questions that require yes or no answers. 

Addressing these issues consistently would help you all to assess their exact financial situation in order to make informed decisions. You may decide to involve a lawyer or financial advisor for clarity and the way forward.

Go Easy on Lending Them Money

It is not easy to disappoint them but sometimes you have to muster the courage to say ‘no’. Especially if your parents are still earning an income but misusing their money. Stand firm and inform them of your financial obligations.

Analyzing an individual’s finance capability of paying their debt or loan back is an important task .As per nation21loans finance experts, if you agree to lend them the money, prepare a repayment schedule. Agree on when and how they would pay you back. 

An alternative to consider is giving them a set amount money each month. Figure out how much you can give without expecting it back. Tell them that’s all you can afford. That way, they have no choice but to work with that amount. Keep in mind that giving them more than USD 14000 in a calendar year attracts federal gift tax of 40%.

Manage Their Finances

Depending on their situation you might have no choice but to take over their finances. This must be done gently to avoid resistance because they feel a loss of control. Assure them that you are partnering with them to improve their situation. Their poor money management may affect you in the long run if you don’t make some of the decisions.

Go through all the details of their expenses, debts and savings. Check where they are going over-board and discuss ways to stay in check.

Your parents can qualify to be dependants if you are covering more than half of their living costs. For example, food, medical bills and housing. As long as they don’t earn more than $ 3950, they qualify. This would help you by reducing your taxable income.

Involve a Financial Planner

A qualified third party would answer all your questions. Make sure that you hire a professional. They should be a good fit for your parents and their specific situation. Ask around for referrals and check the industry database. 

SC&H Group mentions that a good advisor should listen more than they speak. Your parents’ best interests should be their priority. Many so-called financial planners are simply sales people looking to make a quick buck.

A good financial planner should evaluate your parents’ finances and address the following:

  • Retirement plan
  • Debt reduction plan
  • Tax efficient plan
  • Long term care insurance plan
  • Investment portfolio
  • Estate plan
  • Lifestyle plan

Ask for Help

Your own situation may indicate that you cannot afford to support them yourself. Ask for help from your siblings and other relatives. Taking on this responsibility alone may lead you to sacrificing your own needs and cause depression.

How Can your Parents’ Debt Affect You?

Typically, you are not responsible for your parents’ debt when they are deceased. However, if you are a signatory on their accounts or inherited their estate, you would have to settle the creditors. Do not cosign their accounts if they are in debt.

Depending on the law in your state, you would have to cover their medical bills if their estate has insufficient assets. If your parents are covered by Medicaid when they pass away, the state would recover payments from the insurance. 

If you inherit their home with a mortgage, you would be expected to continue paying it off. If you sell the house and still owe some money, the bank would get paid the difference by the estate.

Tax authorities are normally considered first. Any outstanding taxes would be paid off by the estate.


Your parents are probably bad with money because they don’t know any better. Casually educate them. Remember to deal with them tactfully. It’s complicated enough talking to friends or spouses about their poor money management. More so your own parents. Approach them in a way that would not make them angry and embarrassed. 

Keep in mind that they would find it difficult to change habits practiced over several years. You would have to be patient but consistent. If you are great at handling money, let your own life show them that your information is reliable. If you are still in the process of getting out of debt, show them your progress.

After years of ignoring their issues, they may get tired of their situation and take your advice. It is never too late to learn so don’t give up on them. Eventually, you would have a peace of mind and your parents would retire debt free. 

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