How to Help Parents Who Are in Debt
A parent’s financial problems can be a very difficult thing to deal with. This is one of the most difficult situations you may face in your financial life: realizing that your aging parents are in debt.
Maybe they were caught off guard by rising medical expenses, or maybe they simply took too many years off from saving and investing. Whatever the cause, they’re going to need help getting their finances back on track, even if they don’t want to ask for it.
Discussing their situation may be among the most challenging conversations you’ll ever have—and one of the most necessary.
What to Ask Them
If your parents are in debt, it can be very tough on your relationship with them. Your biggest challenge is not going to be coming up with a technical personal finance solution for their problem. Instead, it’s going to be asking lots of questions, listening carefully, and deciding if they actually want help, and if they’re ready to receive it.
If they do, great! You can help them. But if they don’t, one of the most difficult things you’ll ever do is respect their decision, even as their situation might become increasingly dire.
In my experience, if you approach the topic of money with your loved ones in a careful, compassionate way, they’ll open up to you.
Every situation is different, but here are some questions you can ask. (Remember: Tread gently. Nobody likes talking about money—especially if it means having to admit to their kids that they need help.)
■ Where did they learn about money? What did their parents teach them?
■ If they could wave a magic wand and be in any financial situation, what would it be? (Let them dream here. If they say “win the lottery,” encourage them. What would that mean? What would they do?
Then get more realistic: “Okay, let’s assume you can’t win the lottery. What would your ideal situation look like five years from now?” Most parents have pragmatic dreams.)
■ How much do they make per month? How much do they spend?
■ What percentage of their income are they saving? (Almost nobody knows this. Be reassuring, not judgmental.)
■ Do they pay fees for their bank accounts and credit cards?
■ What’s their average monthly credit card balance? Out of curiosity (use that phrase), why isn’t it zero? How could they get it there?
■ Do they have any investments? If so, how did they choose them?
■ Do they own a mutual fund or funds? How much are they paying in fees?
■ Are they maximizing their 401(k)s, at least contributing as much as their company matches?
■ What about other retirement vehicles, like a Roth IRA? Do they have one?
■ Do they read iwillteachyoutoberich.com? NO? WHY NOT, DAD?!?! (Note: I highly recommend that you scream this really loudly at them.)
Your parents might not have answers to all these questions, but listen closely to what they do tell you. I’d encourage you to take the 85 Percent Solution approach and figure out one or two major actions they could take to improve their financial situation.
Maybe it means setting up an automatic savings account, or focusing on paying off one credit card so they can feel a small sense of accomplishment.
Think back to when you didn’t know anything about money and it was incredibly overwhelming. Now you can use what you’ve learned to help your parents make small changes that will have big results.
Should You Tell Your Parents and Friends How Much Money You Have?
Years ago, I started to feel that I should talk to my parents about money. My business had grown. I’d become more financially secure than I’d ever imagined. And when my parents asked how business was going, I’d answer in generalities—“Things are good!”—when in reality, I knew that sharing a single revenue number would be more specific than anything else I could say.
I called my friend Chris for advice.
“Should I tell my parents?”
Chris is an author who was raised in a household similar to mine. He instantly understood what I meant.
“Why do you want to tell them?” he asked. I told him it would answer a lot of questions I felt were beneath the surface. Am I doing fine, financially speaking? Did my parents do the right thing by moving to this country? Are they proud of me?
But I was nervous because I thought sharing specific details about my success might change my relationship with my parents. “It might get weird,” I said, using a loaded word that anyone with ethnic parents will understand.
Chris, more than almost anyone else, knew what it was like to grow up as an Asian kid with frugal parents, then earn more than you ever imagined.
Ultimately, I realized that I wanted my parents to know I was doing fine— that they’d prepared me for life, that I’d learned their lessons, and that they didn’t need to worry.
Chris pointed out that I’d been thinking a single number would communicate all of this, but in reality, I could assure my parents in lots of different ways. I could simply tell them my business was doing well. I could thank them for teaching me the discipline to grow a business. And I could do the thing that’s most meaningful to parents: spend time with them.
Chris was right. He taught me that my intention was right, but I didn’t have to get into exact dollar figures to communicate that I was secure. In reality, my parents don’t care about the number in my bank account—they just want to know that I’m happy (and of course that I’m married and having kids— these are Indian parents I’m talking about).
The next time I spoke to my parents and they asked how things were going, I took extra time to thank them for everything they’d taught me and told them that, thanks to them, I was fortunate enough to have a dream business that let me live an incredible life.
■ As you become more financially successful, your relationships with others might change. Be aware of it. (For example, I’m hyperconscious about different people’s ability to spend on a dinner or vacation.
If I’m meeting a group of friends for dinner, I’ll always pick a restaurant that we can all easily afford. My nightmare is choosing a place that makes them feel financially pressured.)
■ You might be tempted to share specific numbers. If it’s with your spouse or a very close friend or family member, okay. But beyond those people, ask yourself why: Is it to communicate that you’re doing well? Or is it to subtly show off?
Are there other ways of communicating this? Remember, sharing numbers without context is a bad move. Your intention might be good, but to someone who earns $60,000, telling them you’re on track to have a $1 million portfolio (or much more) doesn’t communicate safety and security. It communicates arrogance.