Is paying your mum or dad’s debts really a good idea?
There was a lovely story a couple of years ago about Tyrone Mings paying off his mum’s debt But he was a successful professional footballer so he could no doubt afford it. For the not so rich, there isn’t a simple answer as every case is different, but I’ve put together some pointers for you to look at the options.
I’ll talk as though it’s your mum’s debts, but of course it applies equally to your dad’s or another relative.
Are your own finances secure?
This is the key question. There will be other ways of tackling a parent’s debt problems apart from you bailing them out. Don’t mess up your money situation by trying to rescue theirs…
So do you have debts of your own? Do you have an emergency fund that will last several months if you or your partner lose their job, or there is some big benefits problem and your tax credits aren’t paid? If you have a mortgage, will an interest rate rise cause you problems? Are you paying into a pension so that you don’t end up with money problems when you are older?
Not many people are going to be able to say that their own situation is secure. It’s nothing to be ashamed of, that’s the way things are for most people. You can still help your mum and support her in other ways, even if you can’t pay her debts.
Do you owe her money?
I don’t mean are you grateful to your mum for giving you a great childhood or putting up with you as a teenager – that’s what parents sign up for when they become parents, you don’t owe them money for it.
But what has happened since you are 18? If any of the following apply, you may decide that morally you owe your mum a debt even if legally you don’t:
- did you live at home at a low or zero rent when you were a student or afterwards when you were saving money?
- did she buy you a car, give you a deposit for a house or help you with debts?
- has she passed on any inheritance from your grandparents straight to you?
- is your mum doing unpaid childcare for your children that stops her working?
There’s a nice story here The touching moment pair discover their son has cleared their loan for dad’s birthday but actually as the son says he is living at home and paying “a ridiculously low amount on rent” … so well done to him for repaying that loan, but it’s hard not think that actually he owed them the money!
Is she getting any benefits they are entitled to?
There is a good benefit calculator here that can help find out if she is entitled to help.
She may not like the idea of claiming benefits, but she has paid her taxes. If she should be getting Pension Credit then this will also help with Council Tax bills and possibly the mortgage as well. Housing Benefit can help with the rent.
If she is too proud to claim benefits but not too proud to ask you for help… well my reaction would be to say No.
How bad is the debt problem?
No matter how well off you are, you need to know the true extent of her debt problem – all those envelopes have to be opened and added up. If your mum has just being trying to ignore the debt problem for a while, she may be very scared of trying to sort it out and hoping that a cheque from you might mean that she doesn’t have to talk to her creditors – she may not know how large her debts are herself.
I’ve looked here at how to help a friend with debts. This isn’t necessarily going to be easier because it’s your mum rather than a friend – it can be much harder to be sensible when there are a lot of emotions around.
What is the cause of the debts?
Unless the cause of the problem is completely obvious and in the past – say a large shortfall from a mortgage repossession or a failed business – you also need to look at the bank statements to see what money is actually being spent on at the moment.
If she has always had a problem with money then this is a big red flag for you. If you clear her debts now, she will have a good credit record again and most likely go on to run up some more. Will you be able to afford to do the same again in another few years? It sounds unkind, but sometimes running out of money and credit is the only thing that will make a difference.
If the house is bigger than is needed, this is a really tricky situation, bound up with a lot of emotions about where she brought you up and where she hopes to have grandchildren come to stay. But unless you are seriously rich (in which case you probably wouldn’t be reading this) it doesn’t make much sense for you to subsidise her to stay in a house that is too big:
- moving somewhere smaller could reduce the rent or mortgage, or even free up the money to pay off other debts;
- smaller homes mean lower council tax, utilities, repair costs; and
- moving sooner rather than later means she is more likely to settle in and make new friends in an area.
But if you are surprised she has a money problem, this really does need to be looked into.
It’s not uncommon to find that several hundred pounds a month are being spent on insurances or subscriptions that she doesn’t need – she may be being cold-called by “nice people” trying to make sure she has the insurance she “needs”.
She may have developed a comfort-shopping habit with wardrobes full of barely worn clothes, started spending too much on or has very high grocery bills with a lot of alcohol purchases.
None of these are easy problems to deal with, but you helping out with her debts isn’t going to help them.
What are the other debt options?
If you now have a complete(ish) list of debts and a rough budget, then you can help your mum look at what her debt options are – there is a simple guide here. Unless it is really obvious what has to be done (sell the house? bankruptcy?) then a Debt Management Plan is often a good first move, buying some time with creditors and for your mum to get used to what is going to be needed in the long term.
If your mum is going to have to move or go bankrupt, you could help with the moving costs, rental deposit, act as guarantor or pay her bankruptcy fees. These are often much better uses of your money than paying some of her debts and then watching them mount up again.