These days a lot of parents or grandparents find themselves acting as the family bank or ATM. They provide financial assistance to family members who should be financially independent. The trouble is, unlike a real bank, you don’t get repaid most of the time. Many people find they are reducing their standard of living or becoming financially uncomfortable because of the money they give to other family members. They also risk eventually becoming burdens on the family members they are trying to help.
Merrill Lynch recently did a survey on the issue and issued a report about it. It defines the problem and how it can come about. Importantly, it also gives advice for setting boundaries and restrictions on family financial transactions and incorporate such transactions into your financial planning.
There is a dangerous absence of planning, discussion,coordination and establishment of safe boundaries as peoplenavigate these new family interdependencies. This lack ofproactive engagement and discussion can negatively impactevery aspect of a person’s retirement.Very few people talk with close family members aboutimportant financial topics, such as level of financial security,plans for living arrangements in retirement, inheritance orlong-term care. Seventy percent of those age 25+ have nothad an in-depth discussion with their parents about theseretirement issues. More than half of those age 50+ have nothad such discussions with their adult children, and nearly one-third age 50+ have not even had such discussions with theirspouse (FIG 24). Just one in four (24%) have discussed howtheir parents will be financially provided for or cared for asthey get older.