How to manage the financial costs of caring for aging parents

When we are young and vulnerable, our parents protect and care for our every need.

As time moves on, we grow up, our parents age, and along the way, we fail to think there could ever be a day that they would be the ones that need looking after.

And yet 1 in 4 Canadians currently provide some form of unpaid care to a senior parent or relative.

We use the term ‘unpaid’ to emphasize the fact that family caregivers take on this responsibility without any kind of financial compensation. Quite the opposite in fact, with many paying out-of-pocket expenses totaling close to $6,000 a year.

When care needs become too great for family members to handle, hiring professional help tends to be the next course of action.

However, this type of care often comes at a premium.

Personal Support Workers (PSWs), for example, can cost in the ballpark of $25 to $35 an hour, with families often spending between $2,500 and $4,000 a month. And that’s just for part-time PSW assistance. With numbers like those, it’s quite understandable how the costs of caregiving can feel overwhelming. But it doesn’t have to be. Like any challenge in life, overcoming the financial burden of looking after an aging parent all starts with a plan.

Here are 4 ways you can plan to better navigate the costs of caregiving:

1: Start the (caregiving) conversation early

Like booking a flight the night before, coming up with caregiving on the fly tends to be more costly since the need is immediate. This leaves very little time to plan effectively.

Plus, it’s not just aging parents that might one day require caregiving.

Accidents and illness can happen at any age, which is why it’s important to discuss personal care needs when you and your loved ones are healthy and capable of making sound decisions. This ensures that everyone receives the care option they want (e.g., aging at home, assisted living, nursing home, etc.). More importantly, you’ll have sufficient time to gauge the associated costs in order to choose accordingly based on budget.

2: Understand your parents’ complete financial picture

Proactively taking inventory of your parent’s full set of income sources (e.g., pension, CPP, OAS, investments, etc.) will give you a better idea of how much money you have to work with. This is crucial since caregiving costs aren’t cheap and will only continue to rise.

But knowing their finances is only one half of the equation.

3: Have them establish a Power of Attorney (POA)

In order to assume full control of their finances, your parents will need to have a POA in place that names you as their ‘agent’ or ‘attorney-in-fact’ for both financial and personal care decisions. This will only come into play should your parents be legally deemed incapacitated.

4: Keep their finances separate from your own

When the day arrives that you assume the role of caregiver, be sure to keep your parents’ property and finances separate from your own. While you view them as your parents, to the government, they’re an added source of income if you don’t maintain this separation. Moreover, if funds are mixed and discrepancies arise, you could be ordered by a court to pay back that money from your personal assets.

In addition, there are various federal and Ontario-specific tax credits and benefits for caregivers.

FEDERAL:

• Canada Caregiver Credit (CCC): A non-refundable tax credit available to individuals who support a spouse, partner, parent, grandparent, or other dependent with a physical or mental impairment. The amount that can be claimed depends on the dependent’s income and relationship to the caregiver, but it can significantly reduce taxes owing.
• Home Accessibility Tax Credit (HATC): Allows caregivers or seniors to claim eligible renovation expenses of up to $20,000 per year for permanent home modifications that improve safety and accessibility. These include wheelchair ramps, walk-in bathtubs, grab bars, and stair lifts.
• Medical Expense Tax Credit (METC): Enables caregivers to claim a wide range of eligible medical expenses paid on behalf of a parent, including certain home care services, medical devices, and long-term care costs.

Note: Beginning with the 2026 taxation year, you can no longer claim the same expense under both the HATC and METC (known colloquially as ‘double-dipping’).

• Employment Insurance (EI): Available for those who must take time away from work to care for a critically ill or injured adult family member.
• Compassionate Care Benefit: An extension to EI payments, available when caring for a family member during their end-of-life stage.

Did you know: as an education member, collective agreements typically include a Supplemental Employment Benefit (SEB) plan that provides a temporary top-up to your EI payments for specific leaves (such as a family medical leave).

ONTARIO-SPECIFIC:

• Ontario Caregiver Tax Credit (OCTC): Complements the Canada Caregiver Credit by allowing caregivers to reduce provincial taxes owed when supporting an infirm dependent relative.
• Ontario’s Employment Standards Act: Provides job-protected Family Caregiver Leave and Family Medical Leave, allowing employees to take unpaid time off without risking their employment. While these leaves do not replace income, they offer critical job security during caregiving emergencies.
• Ontario Home and Community Care Support Services: Provides publicly-funded assistance such as nursing care, personal support workers, physiotherapy, and occupational therapy, depending on eligibility and assessed need.
• Ontario Caregiver Organization: Offers education, peer support, coaching, and navigation assistance to help caregivers understand available resources and manage stress.

Plus, don’t forget that caring for a retired education member requires an educator-specific plan.

Educators Financial Group can help you create a comprehensive care plan that optimizes resources (like your pension), minimizes taxes, and aligns with specific needs and goals.

Prepare for your caregiving needs of tomorrow by reaching out to us today

Sources:
https://www.statcan.gc.ca/en/subjects-start/older_adults_and_population_aging
https://cacheducation.org/news/the-cost-of-caregiving-in-canada-navigating-expenses-and-finding-support/