Financial help for families: When does it go too far?

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Q: My brother and sister-in-law have struggled financially for years. Now they are facing bankruptcy and the prospect of losing their home. My parents have bailed them out quite a few times and are currently contemplating taking out a mortgage on their own home to help my brother and his family keep their home. I get that my parents don’t want to see their grandkids uprooted from the only home they know, but my parents should be enjoying their retirement. I don’t want to see them burdened by a debt they shouldn’t have to pay. What can you suggest? ~Nelsa

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A: Seeing a loved one struggle financially can be incredibly difficult, and many parents are willing to go to great lengths to support their children. Your parents wouldn’t be the first to step in and help, even when it means bearing the financial burden themselves. However, taking on a significant amount of debt in later years can have severe consequences for your parents’ financial well-being than they might anticipate.

When it comes to money, family relationships can be complicated, and when emotions are charged, it can be challenging to have productive discussions. There are, however, a lot of options to consider when helping a family member with a serious debt problem, so here are some things to consider as you navigate this complex situation.

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A one-time crisis versus an ongoing situation

When someone faces financial difficulties, the visible signs are often apparent. These can include changes in home organization, debt collection letters, distressing phone calls, signs of sleep deprivation, missed appointments, avoiding family and friends, and strained communication. However, beneath the surface lie details that can lead to potential solutions for their debt.

Warning Signs of Financial Trouble

Debt often serves as a symptom of deeper issues. For example, relationship problems within a couple or with their children could be the real reason for the financial stress. There could be embarrassment or uncertainty due to household spending problems. Feelings of shame from losing money to a bad investment or experiencing a reduction in income, such as from illness or injury, can also exacerbate financial difficulties. To establish a lasting debt solution, identifying and addressing these underlying problems is essential.

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Receiving one-time financial assistance from a family member can provide much needed relief. However, ongoing bailouts can lead to dependency. When individuals consistently rely on support, they may stop taking proactive steps to manage their finances and underlying issues more effectively on their own. It’s therefore essential to strike a balance between helping and encouraging self-sufficiency.

4 Reasons Why Not to Bail Adult Kids Out Financially

Important considerations before becoming the family bank

Before providing financial assistance to a family member, it’s important to evaluate the situation with everyone’s best interests in mind. Encourage the person or couple experiencing financial problems to explore all debt relief options first. If they haven’t already, suggest that they contact a local credit counsellor at a non-profit agency to identify the most suitable solutions. If your family member is open to it, offer to accompany them to their appointment to provide moral support and to help them make informed decisions afterward.

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The credit counsellor will provide a comprehensive overview of options, including some your family member likely does not know about, and answer their questions. It can be daunting to think that bankruptcy and losing your home is your only option when facing overwhelming debt. However, receiving information and guidance can offer peace of mind and a new sense of hope, as they navigate the uncertainty of dealing with debt.

3 Ways to Help Family or Friends in Financial Trouble

If you or your parents are considering providing financial assistance to a family member, it’s crucial to prioritize your own situation and well-being. Consider whether you can comfortably give the money without straining your finances. Regardless of prior situations, determine if these funds are a one-time gift or if repayment is expected. If you expect to be repaid, evaluate whether repayment is realistic based on your loved one’s circumstances and their past financial behaviour. Additionally, reflect on your feelings about helping — do you feel positive about providing assistance, or are feelings of resentment starting to creep in? Both compassion and practicality are essential when supporting family members.

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As you consider assisting one family member, think about how that impacts other family relationships. Senior parents with multiple adult children often strive for fairness and equality. If one child monopolizes their financial support, it could affect the parents’ ability to assist other children or distribute an equitable inheritance.

How Seniors Can Get Help With Debt

Of equal importance is considering your long-term financial needs as you age. While options to increase your income become  limited, it’s essential to envision how you want to spend your golden years. Some hobbies, such as travelling, crafting, golf, or entertaining, can be costly. Large debt payments can significantly impact what you can afford. As age-related limitations arise, consider that medical costs may consume a larger portion of your budget than before, especially if a move into a senior’s home becomes necessary. Avoiding excess debt is vital to prevent becoming a financial burden to your adult children and ensure you can cope effectively.

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Budgeting for Retirement When Living Costs are High

If you’ve previously assisted a family member, it’s essential to evaluate whether your help is effective or if it reinforces financial dependency. While providing monetary support is one way to assist, there are other ways to help loved ones without directly giving them any money. If repeated financial assistance has become an unbreakable cycle, consider strategies that promote independence and self-sufficiency. This approach will ultimately benefit everyone.

The bottom line on helping loved ones with money

When a helping hand becomes an expected handout, it’s a sign that the help has gone too far. Experts often refer to this as tough love. While loved ones may face difficult choices due to their circumstances, burdening parents or other family members with their debt isn’t the solution. Setting boundaries with family can be difficult, but the best legacy parents can leave their adult children is the ability to support themselves and their families independently.

Related reading:

How to Help a Friend Who Is Having Money Problems

Options When Borrowing from Family to Consolidate Debt

Saving Face Financially, How to Back Out of a Commitment

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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