Your parents likely taught you all about money, helped you open your first bank account, and gave you an allowance. Sadly, over time, these roles frequently reverse themselves.
Many of us in our 40s and 50s find ourselves in the position that we must help our aging parents manage their money.
This can be awkward and difficult in some circumstances, but there are things that can be done to make the transition easier.
The Effect of Ageing on Managing Finances
As with many other aspects of life, age may eventually impact an individual’s capacity to manage their finances and make wise decisions. A change in cognitive ability or even relatively minor health issues can have challenging consequences for handling their money.
It’s common for spouses to divide tasks over time. Perhaps one pays the bills while the other manages the investment accounts. This can be fine while both are still living, but ultimately, the surviving spouse will be left with additional responsibilities that they’re not accustomed to. Errors can be made, especially in times of grief.
Where to Begin
- Insurance. While there are many issues to address, health insurance and long-term care coverage is critical. While never inexpensive, the likelihood of needing it at some point is quite high in older folks. Ensure the necessary insurance coverage is in place but is also manageable. Perhaps it is time to consider a higher excess to reduce the cost of the cover but ensure the cover is in place when it is needed, rather than the policy being cancelled due to cost when it is needed.
- Savings. Make a realistic assessment of where your parents stand financially. How much is there? How likely is it to last throughout the remainder of their lives? Is the money invested in adequate places? Don’t be afraid to call in an expert if you’re not knowledgeable in this area.
- Budget. It would be wise to take a look at their spending habits versus their income and savings. Are they spending the money they have wisely? Communicate with them about any adjustments you think they should make.
Getting More Involved
It’s usually wise for at least one the children to be added to all of the parents’ accounts. There are ways to do this that don’t permit the person added to the account to use or spend the funds, if that would make your parents more comfortable. But they still receive all the statements and are notified in the case of missing or late payments or any other issues.
Automating things as much as possible can be a huge help. This includes bill payments as well as any deposits.
If your parents have a large amount of equity in their home, but need more cash, looking into a reverse mortgage could possibly help them as well.
Helping with Estate Planning
Be sure that the proper person(s) will have the legal authority to act on your parents’ behalf. Seek out the proper legal advice sooner rather than later regarding such things as access to bank accounts, wills, trusts, medical decisions, and more
When the time comes, it’s important to assist your parents with their financial decisions. You must respect their desire for independence while still providing them with the support they need.