Supporting Family Members in Need Without Risking Your Own Financial Future

A recently released survey from the Society of Actuaries revealed that most Americans feel it’s their duty to provide financial support to family members in need.

In fact, about two in five Americans have provided such support to a family member during the past year, according to the survey, titled Family Obligations Across Generations (PDF).

It’s only natural to want to help loved ones. Some financial advisors note that with the ever-increasing cost of education, skyrocketing student loan debt, increased longevity, and the constantly rising cost of housing in many urban centers, obtaining monetary assistance from extended family in order to survive has become increasingly critical.

What’s more, most Americans think that assistance should work both ways – with parents providing financial support to adult children, and children jumping in to help their aging parents when the need arises.

One of the ideas raised by the study however, is that providing such assistance should not jeopardize one’s own finances. Easier said than done right? It can be a tricky balancing act when your heart wants to help but your head (and your pocketbook) suggest otherwise.

“Traditionally, most financial advisors tell their clients not to compromise their own financial situation to help friends or family members,” said Misty Lynch, a behavioral financial advisor and certified financial planner with John Hancock. “While this is sound advice, it can be very hard to follow – especially when it comes to your loved ones.”

With that in mind, financial experts share their tips for when and how to help a loved one while protecting your own financial future.

Start Preparing to Provide Help Early

Most parents want to help their children financially, particularly when it comes to funding higher-education. But keep in mind that providing such assistance to children can impact your own retirement if not planned for properly.

“As a certified financial planner, I know that by compromising my retirement savings to put [my children] through college I run the risk of being a financial burden to them when I am older if I can no longer support myself,” said Lynch. “So, to do both, I started college savings accounts for both children when they were six weeks old. I put $25 into each child’s account automatically every paycheck. There may not be enough to pay for their entire education, but I feel comfortable knowing money is invested for that purpose when they need it.”

What’s more, starting an education fund early in your child’s life with a small amount of money allows you as the parent to continue to fund your retirement at a higher rate, said Lynch.

Read more: Three Reasons New Parents Shouldn’t Stress About Saving for College

Review Your Bottom Line First

Before saying yes to a loved one’s request for money, go over your budget and financial picture. This step might even involve speaking with a financial advisor to discuss your income and expenses as well as the family member’s financial request for support.

Answer these questions: Are you able to pay your own bills and consistently put money into a savings account? Do you have extra money that you might otherwise have available for free spending?

“There are a lot of different tools and calculators available online to help review your finances or you could just sit down and look at your bank statement,” said Lynch. “And also, ask yourself – if you don’t get it back, would it strain your relationship?”

Don’t Shortchange Your Retirement

If possible, it’s best to avoid dipping too significantly into your retirement funds, or decreasing your contributions, in order to help family members. Unlike college, there are no scholarships or unsecured loans designed to cover the full cost of retirement, says Joe DePaulo, CEO and co-founder of College Ave Student Loans.

“And while college lasts for about four years, retirement could be 30 years or more,” says DePaulo. “Taking from your retirement nest egg or cutting down on your retirement contributions could mean your child will foot the bill in the future. A good rule of thumb is to make sure you’re not paying more for your child’s college education per month than you are saving for your retirement.”

Share the Financial End of Caregiving Among Siblings

When it comes to supporting aging parents, location can play a big role in who provides the assistance in large families with multiple children.

“Typically, the person who is physically closest has to do most of the work… However, this could eventually cause a rift between siblings if the need increases over time,” said Lynch. “A good way to keep things from becoming unfair is to share the financial end of caregiving equally or in a way that makes sense between family members.”

Research Employer and Community Resources Before Making Major Decisions

Your employer may offer benefits, such as employee assistance programs that provide information and advice to help you manage your various responsibilities as a caregiver, including financial obligations.

“Subsidized child care and adult care may also be a benefit that you can take advantage of when needed,” said Lynch. “Explore the benefits at your company and talk to others about your situation at work. There may be help available that you aren’t aware of.”

Employer sponsored programs aren’t the only avenue to consider when searching for ways to ease the financial burden associated with helping family members. Anna Rappaport, of the Society of Actuaries, suggests looking for community resources as well.

“Think about community resources and how to get things done so it doesn’t cost so much money, some people are a lot more resourceful than others,” said Rappaport, who is chair of the SOA’s Aging and Retirement Strategic Research Program. “Area agencies on aging are a very good place to find out what’s available in your community and at modest cost.”

Read more: Eight Life Essentials You Can Get for Free

Know When to Say No

There are certainly times when it’s appropriate to decline to provide financial support for a family member, as hard as that might be. Determining when to say yes or no may depend on a variety of factors, including your values, your financial situation, and the specific request being made.

“If you really can’t afford it, I think it’s important not to support someone else,” said Lynch. “It’s also important to say no if what they’re doing with the money is not something you support or if it’s conflicting with other goals and beliefs you have.”

In other words, while it’s important to help, it’s also important to set limits, said Rappaport. “A senior should take care of themselves first, while still trying to help others,” said Rappaport.

Read more: How to Help a Financially Irresponsible Family Member or Friend

Bottom Line: Don’t Feel Guilty

Family is a critical part of the fabric of society and there’s nothing wrong with helping your children, parents, and other loved ones in a financial bind. The key is to find the right balance between providing that assistance and maintaining your own safety net, say financial experts.

“I think everyone is feeling the impact of the increased cost of living at some level, whether they are the ones who have to help someone else or are the ones who are in need the help,” said Lynch. “It’s natural to want to help. You should not feel guilty. On paper it may not be a good idea, but if there are ways to contribute without impacting yourself too much, it’s more important than saying ‘I can’t do this.'”

Mia Taylor is an award-winning journalist with more than two decades of experience. She has worked for some of the nation’s best-known news organizations, including the Atlanta Journal-Constitution and the San Diego Union-Tribune.

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