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You can "prove" things till you're blue in the face. You can argue and explain. This is how she is now, and you might as well accept it. Her brain is broken.
You should talk to her doctors about this, since there may be a medication that would help. Also, start looking for a memory care facility for her. She probably won't be able to live independently for long, if she is indeed independent now. You're probably doing quite a bit for her if she's already at the level you describe.
I'm very sorry. Been there, done that. My mother insisted that Chinese people put the cat in the washing machine and the cat had kittens there. The cat had indeed given birth to kittens in the washing machine, but it had been almost 60 years before. And the Chinese people had nothing to do with it.
Her mind is no longer capable of understanding anything that you say.
When my mother did rehab in a nursing home, there was a resident in the home who believed that she was 32 years old and desperately needed to get home to care for her 9 year old son.
No matter what anyone said to this woman, she insisted that she was a 32 year old mother. She was stuck in that loop. She asked everyone to roll her wheelchair to the parking lot so she could find her car to get home to her son. It was heartbreaking to witness.
It’s sad. It’s frustrating. It’s beyond your control. Don’t continue to try and convince her of anything. Redirect the conversation or walk away for a moment. I’m so sorry that you’re going through this.
Speak with her doctor about this situation. Maybe he can prescribe something to help reduce her anxiety.
Wishing you peace as you continue on in your caregiving journey.
You and your husband know it isn’t true but it is very true to your mom and for whatever reason that must frighten her very much. I would not explain or try to convince her. Just let it go. If she brings it up, change the subject or leave. You can not convince her and it will only stress her more to try to convince you or you her. As bad as her believing it, sometimes when a person confabulates, they can be very convincing and they will tell others the same story which can be very stressful to you knowing she is spreading rumors at your expense. It is not a lie she is telling. She doesn’t mean to cause harm. It is true to her. She may have heard something on tv about children scamming their parents. She may have heard someone tell their story about something similar. You are asking her to deny her own truth when you tell her it isn’t true. Don’t engage. It reinforces the memory for her and that is the opposite of what you want. As her dementia progresses, she will forget about it and some other symptoms will appear. My DH aunt had a couple of stories she told. I found out later she told many of her caregivers the same stories. I knew I didn’t stop her from telling others but I was successful in getting her to stop telling me. Being a caregiver is a tough job.
Many others have written on the forum about their parents confabulation. Here is a link to their stories.
https://www.agingcare.com/search?term=Confabulation+