Loving kids to debt: Older Americans in trouble for 'helping' children

Published: Saturday, April 20 2013 8:35 a.m. MDT

Connie knows some adult children in their 50s still financially dependent on their 80- and 90-year-old parents. "They've bailed them out so often that (the adult children) haven't learned the value of money."

Often, "bailing out" involves paying for school.

Assuming parents will pay

Ulrich, who is president and co-founder of ALTA Wealth Management, says for Generation X and younger, there is a feeling that paying for school is just what parents do, Ulrich says. "Of course you are going to pay for my school," Ulrich says younger people think. "You are going to pay for my school, you are going to pay for my wedding, you are going to give me a down payment for a house."

Yet parents are doing this for their children whether the parents can afford it or not.

"Where did we get the idea that this was the responsibility of our parents?" Ulrich says.

A January 2013 study by AARP's Public Policy Institute and Demos found older Americans are more than twice as likely to run up credit card debt to help family than younger Americans. Twenty-three percent of older Americans over 50 say they added to their credit card balances because they gave money to relatives or paid the debts of relatives. Only 11 percent of those under 50 reported the same thing.

Will VanderToolen, director of counseling services at AAA Fair Credit Foundation in Salt Lake City, sees seniors who are caught at both ends — sandwiched between helping their children and their aging parents.

Most of the seniors coming into his office in Salt Lake City have a substantial amount of debt, VanderToolen says. "They are looking down at the next few years and thinking their income just isn't going to cut it," VanderToolen says. "Unfortunately, a lot of people in that age bracket, have been assisting not only their children, but possibly their parents. They are sandwiched into this area where they are taking care of everyone else but not themselves."

The sandwich generation

Dave Ramsey says before parents can really help their children financially, the parents need to be debt-free themselves and have an adequate emergency fund in place. If they have additional savings on top of these financial essentials, then they can consider helping their children financially.

"But if paying for their college or car means you don't have any money in the bank, then you're putting yourself in a risky position," he says. "Retiring and eating are necessities, but helping your kids with college or a car are luxuries. You will retire one day. And I don't believe there are lots of ways to retire other than you being ready for retirement, unless you want to retire on Social Security and buy that cookbook called '72 Ways to Prepare Alpo and Love It.' This doesn't make you a child abuser; it makes you responsible with your money."

This is pretty much the attitude Kay and Connie Wells have.

"When you see that they aren't making any effort, and you are just doing it all, then you don't want to help," Connie says. "If they are making an effort, and they are doing everything possible they can, then I feel like you can help. But if you are going without and they are doing nothing … "

" … then you don't help them," Kay says, finishing the sentence for her.

It works the other direction as well, Ramsey says. Children do need to honor their parents, he says, but not parents' financial misbehavior. "Being in control of your life and building wealth are your only hope to care for anyone else or yourself," he says. "If your parents have been responsible and you're able to help them, help them. But if they've been irresponsible with their money, you're not obligated to help."

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