How can I help my parents, who are in over their heads financially?
February 23, 2013 11:15 AM Subscribe
I am worried about my parents, both of whom make a decent living, but are overwhelmed by debt. I cannot help them financially (and neither can my siblings, really), but I am looking for suggestions as to what direction to point them to be able to help themselves.
They are both nearing 50 and have not saved much for retirement, and over the course of 11 years, they put 4 people through college (2 private, 1 out of state public, and 1 in state public). This required refinancing their mortgage a couple of times and taking out a ton of student loans in their names. While it is true that they do not budget and spend too much on frivolous things, the bulk of their money goes towards their debts.
I would like to send them to someone to help them with their money and budget, but financial advisers and planners are generally looking to sell products.
I think that the biggest problem will be that one of my parents is of the opinion that with the amount of money they make, they should be able to afford nice things. In all fairness, this parent has worked extremely hard for decades, but I think he needs a reality check. My parents are wonderful people and I want to help them in any way I can, even if it only through advice.
They are both nearing 50 and have not saved much for retirement, and over the course of 11 years, they put 4 people through college (2 private, 1 out of state public, and 1 in state public). This required refinancing their mortgage a couple of times and taking out a ton of student loans in their names. While it is true that they do not budget and spend too much on frivolous things, the bulk of their money goes towards their debts.
I would like to send them to someone to help them with their money and budget, but financial advisers and planners are generally looking to sell products.
I think that the biggest problem will be that one of my parents is of the opinion that with the amount of money they make, they should be able to afford nice things. In all fairness, this parent has worked extremely hard for decades, but I think he needs a reality check. My parents are wonderful people and I want to help them in any way I can, even if it only through advice.
I would like to send them to someone to help them with their money and budget, but financial advisers and planners are generally looking to sell products.
Generally true, but it doesn't have to be so. As Sidhedevil notes above, go to a fee-only financial planner. If you're not paying cash for the advice, you're probably paying in other ways (commissions, hidden fees, etc.). Once a year is good enough for most people to keep their portfolio on track and doesn't cost a whole lot.
posted by benzenedream at 11:32 AM on February 23, 2013
Generally true, but it doesn't have to be so. As Sidhedevil notes above, go to a fee-only financial planner. If you're not paying cash for the advice, you're probably paying in other ways (commissions, hidden fees, etc.). Once a year is good enough for most people to keep their portfolio on track and doesn't cost a whole lot.
posted by benzenedream at 11:32 AM on February 23, 2013
You and your siblings should start chipping in toward your school debt. You may not be able to cover all of the school loan payments right away, but you should all start chipping something in and increasing what you pay as you become established and more able. Being saddled with your children's student loans while having nothing saved for retirement and a house that has lots left on the mortgage is not a good situation. They should be enjoying some of what they make while also securing their future and you and your sibs should start paying them back. Maybe your parents will get a reality check once they see how you and your sibs are concerned and putting your money where your mouths are.
posted by quince at 11:59 AM on February 23, 2013 [24 favorites]
posted by quince at 11:59 AM on February 23, 2013 [24 favorites]
I also agree that you guys should chip in on the student loans.
posted by fshgrl at 12:02 PM on February 23, 2013 [1 favorite]
posted by fshgrl at 12:02 PM on February 23, 2013 [1 favorite]
Response by poster: I actually agree with quince and fshgrl, but unfortunately, I am the sibling who is most likely to kick in.. and I make the least money. I will mention it to the siblings, though. At present, though, i could probably only manage like $50/month, which I know is kind of pathetic, but it is really all I could do right now. (And, just to clarify, one of the college educations was a parent, so there are just 3 siblings.)
I have been out of school for a while, but I didn't find out the extent of the loans until recently. And I was the first to go, so they actually didn't start taking them until after I got out, so at first I didn't feel responsible for them, but obviously I was wrong.
Also, apparently there is some rule that they cannot consolidate Federal loans with a private lender who would charge them 3% less interest, which I think is ridiculous. The student loans in my name (that I pay) are at less than 3%, but my parents are stuck with loans that are at almost 8%, even in this low rate environment.
posted by aka_anon at 12:25 PM on February 23, 2013
I have been out of school for a while, but I didn't find out the extent of the loans until recently. And I was the first to go, so they actually didn't start taking them until after I got out, so at first I didn't feel responsible for them, but obviously I was wrong.
Also, apparently there is some rule that they cannot consolidate Federal loans with a private lender who would charge them 3% less interest, which I think is ridiculous. The student loans in my name (that I pay) are at less than 3%, but my parents are stuck with loans that are at almost 8%, even in this low rate environment.
posted by aka_anon at 12:25 PM on February 23, 2013
I think that the biggest problem will be that one of my parents is of the opinion that with the amount of money they make, they should be able to afford nice things.
I think that you are absolutely correct that this is the real problem. Also, I cannot help wondering if this parent is also thinking - consciously or unconsciously - that after putting the kids through college, they will in turn support the parents in retirement.
I'm not certain a financial planner is the correct person to help with this situation, which is much more about family dynamics and expectations than which investments are best for their financial goals. There are family counselors that specialize in addressing money issues - that might be a better resource, especially if you can get your siblings involved in the discussion as well.
Finally, if you and your other two siblings all agreed to chip in $50 a month (you may want to consider giving this money to the more financially responsible parent directly, rather than both of them) with the understanding that it was to be applied to the student loan debt over and above the minimum payments they are already making, that would not be pathetic at all, but would actually save many thousands of dollars in interest over the life of the loan. But I would only do this if you felt confident that the money would be used to pay down the debt faster. If you don't have that confidence, put the $50 a month into a special savings account that becomes the "bail my retired parents out of a financial emergency" fund.
posted by psycheslamp at 12:44 PM on February 23, 2013
I think that you are absolutely correct that this is the real problem. Also, I cannot help wondering if this parent is also thinking - consciously or unconsciously - that after putting the kids through college, they will in turn support the parents in retirement.
I'm not certain a financial planner is the correct person to help with this situation, which is much more about family dynamics and expectations than which investments are best for their financial goals. There are family counselors that specialize in addressing money issues - that might be a better resource, especially if you can get your siblings involved in the discussion as well.
Finally, if you and your other two siblings all agreed to chip in $50 a month (you may want to consider giving this money to the more financially responsible parent directly, rather than both of them) with the understanding that it was to be applied to the student loan debt over and above the minimum payments they are already making, that would not be pathetic at all, but would actually save many thousands of dollars in interest over the life of the loan. But I would only do this if you felt confident that the money would be used to pay down the debt faster. If you don't have that confidence, put the $50 a month into a special savings account that becomes the "bail my retired parents out of a financial emergency" fund.
posted by psycheslamp at 12:44 PM on February 23, 2013
Dave Ramsey's Financial Peace classes. Or at the very least his books.
posted by St. Alia of the Bunnies at 12:56 PM on February 23, 2013 [1 favorite]
posted by St. Alia of the Bunnies at 12:56 PM on February 23, 2013 [1 favorite]
If my grown children came to me and expressed concern about my lack of savings and spending habits, while not paying one thin dime on their college loans, I would be very upset. I would suggest that you and your siblings need the reality check. If you're going to go ahead with some sort of financial planning advice (and I like Dave Ramsey as well), I would urge you to all take the same class or get the same advice. I see from your previous questions that you took a job to pay off your loans--why can't your siblings do the same?
posted by Ideefixe at 1:03 PM on February 23, 2013 [9 favorites]
posted by Ideefixe at 1:03 PM on February 23, 2013 [9 favorites]
I don't know much about financial advisors. I do know that there are some helpful websites. There is a Debt topic on savingadvice.com There is lots of good information on this website.
Not too easy to make an attitude adjustment when it comes to spending but vital. Financial advisors and 0% transfers won't get you far unless your parents are 100% committed to eliminate debt. Writing down every monthly expense and determining where they can cut back is a good first step. Things like DirectTV or cable can be dropped for a $8/month Netflix account. Gym memberships, satellite radio, landline telephone, eating out, going down to one vehicle, etc. are other options.
If your dad is in a "I deserve nice things" mindset there may be little you can do to help him.
If you and your siblings like to eat out, go to the movies, have new cars with payments, and enjoy "extravagant" things like cable tv, expensive cell phone bills, gym memberships, etc. you could and probably should dump these and repay parents monthly. $50 from you a month can help out a lot. There are probably other areas where you could cut back and contribute more, I don't know. The rest of the kids/family should be doing this as well.
posted by Fairchild at 1:06 PM on February 23, 2013
Not too easy to make an attitude adjustment when it comes to spending but vital. Financial advisors and 0% transfers won't get you far unless your parents are 100% committed to eliminate debt. Writing down every monthly expense and determining where they can cut back is a good first step. Things like DirectTV or cable can be dropped for a $8/month Netflix account. Gym memberships, satellite radio, landline telephone, eating out, going down to one vehicle, etc. are other options.
If your dad is in a "I deserve nice things" mindset there may be little you can do to help him.
If you and your siblings like to eat out, go to the movies, have new cars with payments, and enjoy "extravagant" things like cable tv, expensive cell phone bills, gym memberships, etc. you could and probably should dump these and repay parents monthly. $50 from you a month can help out a lot. There are probably other areas where you could cut back and contribute more, I don't know. The rest of the kids/family should be doing this as well.
posted by Fairchild at 1:06 PM on February 23, 2013
Response by poster: @ Ideefixe - All three of us siblings have jobs and pay towards the student loans we took out personally. However our parents took out parent loans in their own names for my two younger siblings. I never knew just how much debt they took out until recently, and I honestly don't know if my siblings realize it either. Honestly, even if we eliminated the student loan debt issue completely, I would still be worried about them.
@ Fairchild - I think that one problem is that that my parents always told us that they would pay for our undergraduate degrees. I had no problem with that when I was younger, but now I realize how much it cost them to do so (in terms of money spent and lost opportunity to save)
posted by aka_anon at 1:30 PM on February 23, 2013 [1 favorite]
@ Fairchild - I think that one problem is that that my parents always told us that they would pay for our undergraduate degrees. I had no problem with that when I was younger, but now I realize how much it cost them to do so (in terms of money spent and lost opportunity to save)
posted by aka_anon at 1:30 PM on February 23, 2013 [1 favorite]
I'd suggest that your siblings be made aware of the debt, and that the ones who benefited from the loans start helping paying them down. College costs skyrocketed and well-meaning parents don't need to take such a big hit. Or else, you all will end up taking care of your parents, down the line.
posted by Ideefixe at 1:44 PM on February 23, 2013 [2 favorites]
posted by Ideefixe at 1:44 PM on February 23, 2013 [2 favorites]
aka_non, I totally understand. My parents took out a small loan for my college expenses too. I think at this point it depends on how much money you and your siblings have and if you can afford to contribute. How many years has it been since you and your siblings graduated with your undergrad degrees? If your parents are nearing 50, I am assuming y'all are pretty young. One of the best things you can do for your parents is to learn from their mistakes. Do not spend money you don't have, and for all that is holy and good, do not have credit card debt.
Honestly, I think your heart is in the right place but not much you can do to help them, apart from helping to pay down student loans. I think their financial difficulties are pretty much none of your business unless they ask for your advice. If your mom is more realistic about their financial situation than your dad, maybe you can talk to her and she can begin talking to your dad.
posted by Fairchild at 1:46 PM on February 23, 2013
Honestly, I think your heart is in the right place but not much you can do to help them, apart from helping to pay down student loans. I think their financial difficulties are pretty much none of your business unless they ask for your advice. If your mom is more realistic about their financial situation than your dad, maybe you can talk to her and she can begin talking to your dad.
posted by Fairchild at 1:46 PM on February 23, 2013
1. Ideefixe may be right that your siblings need a reality check, but this situation is of your parents' making, not your's or your siblings'. Further, it sounds like your parents' desire to give you all the college educations they thought you deserved came at the expense of a lesson in learning to live within one's means.
2. Nevertheless, the impulse to try and help your parents is an admirable one. I doubt there is much you can do though. If, in spite of overwhelming evidence, they can't, as a unit, live within their means, then there isn't much you can do.
3. Reclaiming responsibility for the costs of your education seems a reasonable thing to do, but no matter how much you and your siblings can afford to pay, I'd have my doubts that it would really change anything about the way your parents live their lives. Consider saving money now for the time when it can be best used, such as when your parents get their priorities straight.
4. Do what you think is right, irregardless of what your siblings do.
5. If you and your siblings are already making student loan payments, I'd understand if none of you have much room in your budgets to put money aside, but it still sounds like it would be good for all of you to turn an incredibly critical eye to how you spend your money, since your parents may not have cultivated that discipline in you. That discipline could be the thing that lets you retire early, or buy your dream house, or do meaningful travel, rather than, say, eating out every night, blowing money on vegas weekends, buying a new car every year and/or having a boat you use 1 day a year.
posted by Good Brain at 6:23 PM on February 23, 2013
2. Nevertheless, the impulse to try and help your parents is an admirable one. I doubt there is much you can do though. If, in spite of overwhelming evidence, they can't, as a unit, live within their means, then there isn't much you can do.
3. Reclaiming responsibility for the costs of your education seems a reasonable thing to do, but no matter how much you and your siblings can afford to pay, I'd have my doubts that it would really change anything about the way your parents live their lives. Consider saving money now for the time when it can be best used, such as when your parents get their priorities straight.
4. Do what you think is right, irregardless of what your siblings do.
5. If you and your siblings are already making student loan payments, I'd understand if none of you have much room in your budgets to put money aside, but it still sounds like it would be good for all of you to turn an incredibly critical eye to how you spend your money, since your parents may not have cultivated that discipline in you. That discipline could be the thing that lets you retire early, or buy your dream house, or do meaningful travel, rather than, say, eating out every night, blowing money on vegas weekends, buying a new car every year and/or having a boat you use 1 day a year.
posted by Good Brain at 6:23 PM on February 23, 2013
My wife and I are in your parent's shoes with 2 kids just finished college and 2 still in college. We have taken out parent loans to finance their college education because it was our thinking when we decided to have children that we would want to support them through undergraduate college education. What we want our kids to do is become financially independent. I wouldn't want them worrying about the debt we have from their college expenses.
Just be appreciative and be independent.
posted by Edward L at 8:44 PM on February 23, 2013
Just be appreciative and be independent.
posted by Edward L at 8:44 PM on February 23, 2013
I've been thinking about issues like this recently. My parents divorced shortly after I graduated. My mother was a stay at home mom for a long time, then worked secretarial jobs. Now that she's getting near retirement, I have no idea what her financial situation is like. My sister and I need to chat with mom about that to find out if we're going to be on the hook to support her at some point as she ages.
So, I think this is a great time for you to think about and have an honest discussion with your family. And if they are unwilling to have the discussion at all in a real way to plan, then I think you have no financial responsibility towards them.
You may feel a lot of familial obligation, but they chose to have you, they chose to run their financial life the way they have, and they chose to have three children. They could have sent you all to cheap or the in-state schools. There are many things they could have done to prevent the current situation.
Do they expect you and your siblings to save them if they become destitute? If so, and you want to be put in that situation, then you need to start planning now. Of course, you can always reject those assumptions, especially if you're not in the financial position to assume it.
posted by reddot at 6:01 AM on February 24, 2013 [1 favorite]
So, I think this is a great time for you to think about and have an honest discussion with your family. And if they are unwilling to have the discussion at all in a real way to plan, then I think you have no financial responsibility towards them.
You may feel a lot of familial obligation, but they chose to have you, they chose to run their financial life the way they have, and they chose to have three children. They could have sent you all to cheap or the in-state schools. There are many things they could have done to prevent the current situation.
Do they expect you and your siblings to save them if they become destitute? If so, and you want to be put in that situation, then you need to start planning now. Of course, you can always reject those assumptions, especially if you're not in the financial position to assume it.
posted by reddot at 6:01 AM on February 24, 2013 [1 favorite]
For anyone else reading this thread in future, just to throw this out, Dave Ramsey always recommends that retirement saving come in ahead of college savings, fwiw.
posted by St. Alia of the Bunnies at 12:07 PM on February 24, 2013
posted by St. Alia of the Bunnies at 12:07 PM on February 24, 2013
Response by poster: Thanks again everyone for your help. I have offered to give my parents money every month, but they refused to take it. I also found out that the situation is not as dire as I feared. I have also realized that whatever my fears are, my parents' finances are really none of my business. Worst of all, I was being a hypocrite, especially considering my own issues with money lately, which I have begun to start working on.
posted by aka_anon at 11:56 PM on November 13, 2013 [1 favorite]
posted by aka_anon at 11:56 PM on November 13, 2013 [1 favorite]
This thread is closed to new comments.
posted by Sidhedevil at 11:25 AM on February 23, 2013