This study investigates indicators of disorganized caregiving among caregivers of children who have a familial predisposition of schizophrenia spectrum psychosis (SZ) or bipolar disorder (BP), and whether indicators of disorganized caregiving are associated with the caregivers' and children's level of functioning as well as the children's internalizing and externalizing behavior problems. Indicators of disorganized caregiving were assessed with the Caregiving Helplessness Questionnaire (CHQ). Level of functioning was evaluated using the Children's Global Assessment Scale and the Personal and Social Performance Scale, while dimensional psychopathology were measured with the Child Behavior Checklist. 185 caregivers belonging to a SZ combined group (i.e., SZ-I + SZ co-caregiver), 110 caregivers to a BP combined group (i.e., BP-I + BP co-caregiver), and 184 caregivers to a population-based control group provided data on CHQ. Having a history of SZ or BP or being a co-caregiver to a parent with SZ or BP was associated with higher levels of experiences of helplessness and fear. Higher scores on helplessness were associated with lower level of functioning among caregivers and children and with children having externalizing/internalizing behavior problems. These results emphasize the need for interventions addressing indicators of disorganized caregiving in families with SZ or BP.