Your parents raised you, and now you may be raising kids of your own. You might even find yourself in a role you never expected – caregiver to an aging parent. An AARP survey shows that 40 percent of people who are caregivers to other adults say they were not prepared to take on the role.[1]

The good news? Ninety-one percent say they have positive emotions about helping out. The not-so-great news? More than half admit to being stressed. As with most things in life, planning goes a long way in preparing for the extra responsibilities associated with assisting an aging parent. Here are five tips to help your family financially plan for the years to come.

1. Create your own financial plan first.
Review your money situation and make adjustments as needed. Are you saving enough for your own retirement? Do you plan to help your children pay for college and, if so, can you afford it? When will you need to replace your current vehicle? Remember that thanks to compound interest the earlier you save, the more you can save. Set aside $100 a month in an account with one percent interest starting when you’re 50, and you will have $19,421 pretax savings by age 65. Start saving that same amount at the same interest rate when you’re 40, and you will have $34,075 pretax savings at the age of 65.

Being budget conscious can also help toward your savings goals. If you like to have dinner out, consider skipping just one trip to a restaurant per month. Dinner for two can easily cost about $100 for an appetizer, meals, dessert, drinks and a tip. That’s $1,200 a year that could go toward big-ticket items, rising household expenses, or hiring a lawn service to mow the grass for your aging parent.    

2. Talk to your parents about preparing for their futures.
This role reversal may feel strange. And talking about money can be an emotional and personal topic for many families. Try to set those feelings aside and approach it from a rational, caring perspective. The discussion may be more productive if you have it long before a parent retires or actually needs extra care. Good questions to ask include:

  • What are their preferences about where they live as they get older?  Nearly 80 percent of people over the age of 50 say they want to stay in their current home, but only 46 percent think they will actually be able to do so.[2] Housing size, affordability and the level of health care needed are important factors to consider. The best alternative will depend on each individual situation and can include staying in the current home with or without assistance, moving in with a family member, downsizing to a smaller residence, moving to a retirement community or transitioning to an assisted living or nursing home.

  • How much money will they have available to pay for living and health care expenses in retirement? This includes both retirement savings and any additional income and benefits they may receive monthly from previous employers and/or the government. Getting a full picture and measuring that against an anticipated budget will help you both evaluate the options they can realistically afford.

  • Do they want or expect your help, financially or otherwise? It’s important that you get on the same page in order to maintain a good relationship. Both parties should be honest about their expectations and boundaries. If you are willing to help, but can only afford so much, say so. If your mom or dad wants to remain in control of their own decisions for as long as possible without your input, and are currently able to do so, then it is important to respect those wishes.

3. Solicit professional guidance.
A financial planner can help your parents develop a monthly budget to help afford the preferred living situation. They may also make suggestions to make your parents’ money go farther for a more comfortable retirement, from refinancing a mortgage for lower monthly bills to adjusting how they receive a pension or retirement benefit so it may last longer. A banker can help you become a cosigner on your parents’ accounts if needed, and an insurance agent can help you evaluate the need for long-term care insurance. Finally, an attorney can talk with you and your parents about estate planning or creating a living will.

4. Explore resources to help seniors with their care.
Your parents may have already done this themselves. If not, you can help them apply for retirement benefits, Medicare, or Social Security for which they are eligible. If your parents already need assistance with daily activities and care, shop around for services like in-home care and adult daycare, or talk to other family members who may be able to help out. It’s important to remember that you don’t have to be alone in helping.

5. Touch base with each other annually to see what’s changed.
Know that even if you make a plan together, things can change. Check in occasionally to ask about your parents’ health, finances and living arrangements. If things are the same, that’s great. But if a retirement benefit has been reduced, or their prescription costs have gone up, or they feel they need more help with personal care, it may be time to make a new plan.