Should you bail out spendthrift parents?

By Liz Pulliam Weston

Every time I write about parents who support their grown offspring financially, I get a bunch of e-mails from young adults experiencing the reverse: financially irresponsible parents who are wasting their resources and often turning to their kids for handouts.

"This is more common than you think," said Delia Fernandez, a fee-only financial planner in Long Beach, Calif., who specializes in middle-class clients. "I know one woman who moved across the country so she wouldn't have to deal with her (money-demanding) parents."

Fernandez sees the phenomenon most often among baby-boomer parents -- they "spend like crazy" -- but overconsumption can afflict parents of any age. People older than 65 were the fastest-growing group of bankrupts in the 1990s, according to the Consumer Bankruptcy Project research group, followed by those ages 45 to 54.

We're not talking here about parents who fall on hard times because of disability, ill health or unexpected job loss. Most kids who were raised in loving homes, and even many who weren't, would want to step in to prevent their parents from becoming destitute in those circumstances.

We're talking about the parents who simply live too high on the hog, leaving their children wondering who will wind up paying the bill for their elders' irresponsibility.

The best response to determining whether a child should step in, say financial planners and therapists, depends on what's fueling the overspending. Three of the most common causes are:

• Addiction, when the parent's overspending results from alcohol, drug or gambling problems or a compulsive need to buy.

• Entitlement, when the parent feels owed a slice of the child's success.

• Ignorance, when the parent simply doesn't know how to handle money.

My parent, the addict

Most of the egregious overspending Fernandez sees in parents is fueled by alcoholism, drug dependence or gambling. In most cases, she says, the kids need to administer a healthy dose of tough love and say no."I don't like psychobabble," Fernandez said, but giving addicted parents money "is enabling."

Without your cash, they might finally face the crisis that's needed to force them to get help. But refusing parental requests for money is often tough for children raised in households twisted by a parent's addiction.

"Of course your parents know how to push your buttons. They're the ones who did the wiring," Fernandez said. "You're under no obligation to honor your mother and father by paying for their bad habits."

You owe me

Sometimes you can blame culture for a parent's sense of entitlement. Many first-generation immigrants, for example, take it for granted that their kids will support them as they supported their own parents. (By the third generation, this particular bargain is usually history, so don't expect your kids to step in when you need help.)

Sometimes, though, there's no cultural connection: Your folks may ask you for money simply because you have it.

The situation isn't that much different from an adult child who feels entitled to handouts from his parents, said financial planner Victoria Collins, co-author of "Best Intentions: Ensuring Your Estate Plan Delivers Both Wealth and Wisdom." In both situations, the giver needs to make sure he isn't sinking his own financial boat, and needs to put some boundaries on when and how gifts will be made.

"You could say, 'This is what I can do and still support my own family. I'm not going to support you more than that,'" said Collins, who practices in Irvine, Calif. "It's really parenting in reverse."

Givers also might consider using the leverage of cash to induce the parents to make some changes or see a financial counselor who can help them set up budgets and an investing plan. Whatever the terms of your agreement, Collins recommends putting it in writing so everyone is clear about the rules.

I don't know where the money goes. . .

A visit to a financial planner -- paid for by you, perhaps -- can also be a solution for parents who simply never learned how to budget or invest, said psychotherapist Eileen Gallo, co-author of the book "The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Kids."

A trip to a counselor may be an even better solution for a parent whose spending patterns changed after divorce or death of a spouse, Gallo said. Sometimes depression or the need to stave off loneliness can prompt spending sprees as parents attempt to fill the hole in their lives.

Of course, bringing up these delicate topics is no easy task. You might talk about how much better your life is since you learned to budget, Gallo suggested, or bring in a third party such as a planner or a CPA to help you make your case that some retirement planning is essential. Sometimes, parents will listen to such authority figures when they'd be likely to dismiss any suggestions from you -- particularly if you act like a know-it-all.

"Whatever you do, do not come from a position of superiority," Fernandez warned. "You can't persuade anyone like that."

With all this angst, you might like to know that there is a silver lining to having spendthrift parents:

You can't be held responsible for their debts. Your parents' debts are their own, unless you co-signed a loan, added them to a credit card or otherwise took legal responsibility for their obligations. When your folks die, their debts will be paid from their estates -- whatever's left of them. If there's not enough money, the creditors are out of luck (and so are you, if you expected an inheritance).

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated May 28, 2009