5 Ways to Help Your Family with Money Without Ruining Your Own Finances

Helping family

One of the easiest ways to get into financial trouble is to try and bail others out of financial trouble, particularly your family. While it can be easy to turn a blind eye to the money woes of others, this isn't true with those you love. This dynamic is particularly true in two ways. One situation is when seniors help out their adult children that are struggling. The other is when adults are helping their aging parents who don't have the financial resources to pay their medical bills and living expenses. In both situations, helping out is the right thing to do, but there are smart ways to go about lending a hand.

#1 Help But Don't Enable
If you've got adult children that are unemployed or underemployed and you're paying their bills, you may be setting them up for more failure and are also putting your finances at risk. Encourage them to take any job they can get – even if it's not their dream job. Be firm about limiting the amount of support you can offer them and the length of time you can support them. This should light a fire under them. Be very firm and stick to your guns. They need to know they have to rely on themselves.

#2 Don't Support a Lifestyle That Exceeds Yours
This is more common with seniors supporting adult children, but you shouldn't be helping them live better than you are. Examples would be if they are indulging in vices like drinking, smoking, gambling, having premium cable, eating out a lot, putting their kids in private school or going out shopping all the time. If someone is asking you to help out, they first need to drastically slash their expenses and help themselves. You shouldn't be financing this lifestyle. Until they cut back, take a hard line and say no.

#3 Know How Much You Can Afford to Help
Understand that if you ruin your finances trying to bail them out, then you're both going to be in trouble. Look at your budget and see what you can realistically offer without draining your savings account or having to miss paying your own bills. That means that out of your monthly income, fewer expenses, what can you spare? It's okay if you want to cut back to help out, but you shouldn't dig into your savings or retirement accounts. That's a lose-lose for everyone.

#4 Understand That It's a Gift, Not a Loan
Of course, the person that's accepting the money will promise to pay you back - that's the decent thing to do and they will want to pay you back, but it may not ever happen. When money gets tight, bills get paid late and you have to get all those caught up, so it can take a long time before there's any spare money available to pay back. Instead of letting the debt hang over their head and make you resentful, go ahead and call it a gift. It's better that way.

#5 Consider Consolidating Households
If it's feasible, combining the two households will drastically cut expenses and make the hard times easier to survive. It can also reduce child care expenses if there are minors in the mix and allow more caregiving options for seniors. This can be a short or long term solution. If the adult child is struggling financially, this can be a great way to allow them time to regroup, find a better paying job, get bills caught up and save money. If it's the parent struggling, this may be a good permanent arrangement.