Dec 9, 2024
While many families struggle with the cost of raising children, some face the burden of having to financially support their elderly parents too.
Kari from New Orleans, Louisiana, finds herself in this unfortunate position as her 80-year-old mother requires assistance to manage her housing costs. Her sisters have asked her to pitch in $350 a month to cover ongoing costs that still need to be paid when you have a reverse mortgage, like homeowners insurance, utilities and property taxes.
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“[My step-father] passed away, left her nothing, and their house is reverse mortgage, which is the worst,” she said on a recent episode of The Ramsey Show. “I deliberated with my husband and he's like, ‘Kari, it's a reverse mortgage, why would we throw money into it when your mom has options?’”
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Struggling with debt of their own and the costs of raising two children, the couple now faces an uncomfortable choice between keeping a roof over her mother’s head or their own financial stability. Unfortunately, many middle-aged Americans find themselves in similar situations.
Sandwich generation
As of 2021, 23% of Americans could be considered part of the “sandwich generation” — those supporting both parents above the age of 65 and children below the age of 18, according to Pew Research Center.
Like Kari, this generation faces financial pressures from both sides as the costs of raising kids and senior living escalate. However, the family faces additional pressure from her mother’s reverse mortgage.
A reverse mortgage lets homeowners above the age of 62 borrow money from their equity. Unlike a home equity loan, there are no monthly payments to the loan itself. The loan is repaid when the homeowner moves out, sells the home, or passes away, typically using proceeds from the home's sale.
This financial tool is waning in popularity. In fiscal year 2024, only 26,521 homeowners initiated a reverse mortgage, compared to 64,489 in 2022 and 32,991 in 2023, according to the National Reverse Mortgage Lenders Association.
Reverse mortgages can be a relatively expensive form of debt, since they involve additional costs such as origination fees, real estate closing fees and mortgage insurance premiums, according to the Consumer Financial Protection Bureau. With high interest rates in recent years, this tool has become even less attractive.
Kari says her mother’s home is in disrepair and facing foreclosure if she vacates.
“If she leaves the house she's gonna have to just leave the house and let them get it back,” she said. This is why she considers any financial contribution to be a waste of money.
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Regardless of her perspective on reverse mortgages, co-hosts Jon Delony and Rachel Cruze suggest Kari has a right to set financial boundaries with her family.
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Choosing guilt over resentment
According to Delony, feeling guilty about not chipping in now is better than feeling resentment towards her mother and sisters over the long-term.
“My rule of thumb in these situations is to always choose guilt over resentment, everytime,” he told Kari.
Cruze agreed, suggesting that there is no harm in setting boundaries until the family feels more financially stable. “You can't save somebody else when you're drowning,” she said.
Similarly, other families in the “sandwich generation” may consider prioritizing their own financial well-being before offering help or assistance to parents or other family members. Diminishing your resources could exacerbate money problems and create a cycle of financial dependence on your children down the line.
Dealing with the guilt of saying “no” right away could be better than dealing with additional financial pressures later.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
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