Protecting Your Savings from Your Kids

By July 7, 2017June 30th, 2021No Comments

Will your adult children spend your money before you do?

A Parent’s Dilemma

Ann may run out of money. Her deceased husband Ed and she saved prudently. Those savings and the insurance proceeds from Ed’s passing should have lasted her indefinitely. However, she has an adult daughter Sue whose frivolous spending continues to exceed her income.

Not wanting to see her daughter in a dire financial situation, Ann continues to withdraw money from her savings to support Sue. Ann knows this cannot continue, yet she struggles with how to say “no”. Sue knows that she spends too much on non-essential expenses, but why change when Mom is always there to bail you out?

Handing Off The Blame

What can Ann do to protect her financial well-being, if discussions with Sue have no impact?

  • Make a third-party the “bad guy”. Change the dynamic by saying, “I’d love to help, but my financial advisor warned me to cut my spending down.” Often, a financial advisor is willing to play the role of financial parent when the real parent is struggling in this type of situation.
  • Reduce the amount of “available” savings. Ann could take a lump sum and purchases a product (like an immediate annuity) that provides her with a lifetime of income. This provides her with more guaranteed income and an excuse to tell Sue that she doesn’t have the money to give her.
  • Give away control of her money. The most drastic of the options involves setting up a trust for Ann’s benefit and naming a trusted family member as Trustee. Ann inserts a third party into her finances that can say “no” to Sue. It may seem extreme, but if Ann cannot stop the drain on her savings she might have to consider this option.

What to Do?

In many cases, explaining to an adult child that their financial demands put the parent at financial risk may be enough. In situations where the parent cannot or will not stand up for themselves, at least there are options available to prevent the parent from becoming destitute.

READ MORE: Protecting Loved Ones from Financial Abuse

Elliott Weir, CFP

Elliott Weir, CFP

I work with recently widowed women looking for a different kind of relationship with a financial adviser. No products sold, no costs hidden, and no pressure for hasty decisions - all for a clearly disclosed fixed fee. For those women wanting the patient guidance of an experienced professional paid only to help them, III Financial offers a distinctive alternative to typical insurance agents, investment managers, and wealth managers.

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