Spending

Financial educator: How to save money when you also have to help support family

Kara Perez is the founder of financial education company Bravely Go.
Courtesy Kara Perez

For many Americans, the money we earn doesn't only belong to us. We use our paychecks to help support extended family nearby so that our parents can keep the lights on, or we send it to cousins or grandparents overseas. 

One-fifth of Americans provide financial support for a parent or adult child, and they put aside an average of $12,000 a year to do so, according to a 2015 TD Ameritrade study. A 2020 survey from the AARP found that 32% of adults aged 40-64 are providing financial support to their parents. About half, 51%, of that cohort were also supporting their adult children aged 25 and over. 

I own a company named Bravely Go that helps people navigate personal finances. I started it after realizing, at 26, that I knew nothing about how money really worked. I wasn't financially stable. I struggled to manage my meager income as a waitress, and I had no forward financial momentum. 

My struggles were rooted in my background. I grew up in a single parent household. We never talked about money, and I took the mindset of "money is for other people" with me well into my 20s. In the back of my mind, I knew that one day I could be supporting my mom, and potentially other family members as well, but we had never discussed it. 

Here's how to organize your money and reframe how your family talks about financial support, so you can make the best possible financial decisions right now and down the line.  

When you are or will be living with the family you support

Aileen is a 32-year-old Cuban-American in Florida who provides housing for her mother and covers most of her household costs. Half of Aileen's mom's income was going to rent and utilities before she moved in with her daughter. 

The new arrangement has allowed Aileen's mother to work part-time and save money to send to her extended family abroad. It has also allowed Aileen to focus on her career, since her mother cares for her grandchildren when Aileen is at work. And it continues a family tradition: Her mother supported Aileen's grandmother in similar ways. 

Aileen doesn't remember there being one conversation about her supporting her mother. It was a combination of cultural expectations, a feeling of obligation to help her family, and what was necessary for her own peace of mind.

"It makes me feel like I'm doing right by her," she says. "We are able to be with each other and help each other in our day-to-day lives." 

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If your experience is similar to Aileen's, these tips can help smooth the way when having those potentially tough discussions and help you figure out how your support fits into a larger plan. 

Don't be afraid to ask questions. If there is an unspoken expectation that you will care for a family member, ask them what that arrangement might look like. Try starting the conversation off like this: "Mom, would you want to live with me someday, or do you prefer having a separate space?" Learning what kind of support they anticipate needing in can help you plan now.

Be open about your expectations. Decide, and then be honest about, what kind of help you are able to provide. Make sure that everyone understands whether a shift, like moving in together, is temporary or permanent. And keep talking so that everyone knows if something isn't working or there needs to be a change. Consider having regular check-ins to make sure that everyone is feeling heard.

Talk about everyone's goals and how they're able to contribute. If you have a parent or other older relative moving in, are they currently working or do they want to work, either part- or full-time? Depending on the answer, are they able to cover a part of the household costs or handle child care while you're working? Make sure that everyone is clear and feels positive about their contribution.

When you are living far from the family you support

Nadia is a 38-year-old from Belarus who lives in North Carolina. She moved to the U.S. to go to college because she knew her education and job prospects were better here and that would mean more money for family in the long run. While she was a student, she worked several jobs and lived a very frugal lifestyle.

Nadia says she understood there was a cultural expectation that children would help their parents as they age.

With her husband, she bought an apartment unit in Belarus for her parents to manage. The apartment counts towards her net worth and earnings for both her and her husband, and they split the income from the apartment in Belarus between both her and her husband's parents. "My mom's pension check is $140 a month," says Nadia. "She gets close to $170-$180 a month from the rental. So essentially, this money is more than her government pension."

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If your experience is similar to Nadia's, here are some tips to help you maintain a consistent level of support for your faraway family while also taking care of your own finances. 

Open a new account. The money for your family should get its own account so that it remains separate from the rest of your money.

Set up autopay. Automate a certain amount from your main account to go directly into it on a certain date every month. This "set it and forget it" approach ensures you have the money when you need it and helps keep your finances organized.

Maintain a schedule that works for you. Send money to your family on a certain day each month and stick to that system. It's easy to send different amounts as requests come in. Sticking to one date helps keep a payment schedule and keeps you from going over what you can afford. Regularly check in with them to make sure that the amount you are sending covers what they need and also leaves you enough to save and think about your own future. 

When faced with a crisis, communicate

With the coronavirus affecting how and when we work, remember that it's not too late to put a contingency plan in place. Ask yourselves, what can everyone in our family do if my support needs to be temporarily halted? 

One scenario might be that your family member would move in with you, in lieu of you sending money. If that is the case, and if you're still working, perhaps your relative could help with child care, at least on a temporary basis.

When times are uncertain, open communication is more important as ever. 

To face the future, plan ahead

If you aren't at the point where you are supporting your family, as you look ahead, open an investment account or savings account. Take into account when you anticipate needing to lend a hand, and start putting money away with that time frame in mind. I expect I will have to partly support my family in about 10 years, so I'm investing today to make sure the money is there when I need it.

While you are doing that, don't forget to invest in you, too. Take advantage of any workplace retirement accounts you may have access to, and/or open an IRA for yourself.

Make sure that you are contributing a consistent amount with every paycheck to yourself and your future, too. Apply the consistency you have with your family payments with payments to yourself.

Kara Perez is the founder of Bravely Go, a feminist financial education company. Bravely focuses on bringing actionable, intersectional, and accessible financial education to people via pop-up events and online community. Additionally, Kara co-hosts the award winning podcast The Fairer Cents, which has been named the top money podcast for women by Forbes and The Balance. Kara has been featured in Forbes, NPR, Glamour, ABC Nightline News, and US News & World Report as a financial expert. She lives in Austin, Texas. 

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