Talking about finances can be a sensitive subject at the best of times, but it can be especially difficult to discuss financial matters with your aging parents. Many older adults don’t want to think about the possibility that they might one day not be able to stay on track of their finances. And, along with that thought, many people don’t want to think about the end of their life and the logistics that go along with that.
Those feelings are completely understandable. Not only for parents, but for their children as well. You’ve likely always looked to your parents as sources of comfort and support, and the thought of that dynamic switching and them suddenly needing to rely on you can be challenging to wrap your head around. However, while the initial conversation might feel awkward, talking about finances can help put everyones’ minds at ease so that you can focus on what’s really important: spending quality time with your parents. So, with that goal in mind, let’s talk about the five financial moves you should make to help plan for your parents’ care.
1. Talk Often and Openly About Finances
One of the best financial moves you can make is to regularly engage in conversations about your financial situation. There’s an old idea that it’s not polite to discuss money, but who does that help? Certainly not you or your parents when it comes to making realistic plans about the future. And, even if you are close with someone you can’t ever fully know their financial situation unless you ask. Your parents might spend lavishly but be deeply in debt, or, they might scrimp and save, giving you the idea that they might be barely scraping by when the reality is that because of that behavior they actually have a healthy sum stored away in the bank.
The American Psychological Association put out an excellent podcast episode on how important it is to discuss finances to help eliminate some of the shame that can be associated with poor spending habits. It’s easy for a problem to persist if you don’t address it. So, sit down with your parents and get an idea of what their financial situation is and what that means for their desired care plan as they age.
Many older adults might wish to remain in their homes, or to only receive in-home care should they ever require assistance, but their financial situation might not allow for this to happen, and, if that’s the case, then it’s better to know sooner rather than later so an alternative plan can be put in place. Here are a few of the items you might want to discuss during financial meetings:
- What is your parents’ financial situation? Are they in debt? Do they have investments? What kind of retirement savings or other benefits are they receiving each month?
- What would your parents like their future to look like? Do they intend to downsize? Do they have a support plan in place?
- Are your parents dealing with any medical conditions that could worsen? What will happen if their circumstances change?
- Do they have a financial advisor?
- Are there any additional benefits that they are eligible for?
Even though you might cover a lot of ground during this conversation, it’s important to remember that this kind of communication needs to be ongoing. Initial plans are important to make, but circumstances can change in an instant, so it’s important to have regular check-ins to address any evolving needs as they happen. The more you talk about it, the less awkward it will feel, until eventually it’s just a small part of your relationship.
2. Educate Your Parent on Scams
Unfortunately, many older adults in the United States fall victims to financial scams each year, with some schemes resulting in an older adult losing the entirety of their retirement savings. An elder fraud report for 2022 discovered that more than 88 thousand older adults had been targeted, with an astonishing 3.1 billion in total losses.
Many scammers intentionally prey on members of older generations because it is more likely that they might not be aware of common types of scams, and due to confusion or cognitive decline might not be able to immediately identify the warning signs that something is false.
Scams are also intentionally designed to scare someone by making them believe that they are in deep financial trouble, or that someone they love is in need of immediate help. Scammers then count on the goodhearted desire in most people to do the right thing, which can result in an older person handing over thousands of dollars without telling anyone what’s happening.
Unfortunately, many people are so ashamed at the thought of falling for a scam that they might not reach out for help, or convince themselves that they would never be caught up in one, and so continue to hand over money even if they have some nagging doubts in the back of their minds.
Scams have become such a serious issue facing older adults that it’s very important that they be made aware of the kind of scams that they might be faced with. Yes, some senior centers and banks do try to raise awareness, but the more this issue is talked about, the better the chance is that fewer people will fall for a scam, so it’s a great way for adult children to help their parents protect their finances. While there are constantly new scams being cooked up, here are some of the most commonly used financial scams, as outlined by the National Council on Aging, that you can tell your parents to be on the lookout for:
- Government scams. These scams generally involve a text or a call that claims someone owes the government money. Severe fines or jail time is often threatened if the person doesn’t pay right away.
- Sweepstakes. In this scam a person will be told that they won some kind of prize or sometimes the lottery. It is usually a large amount of money that they are told they have won, but in order to claim it they must first pay a fee in order to be able to access their money.
- Grandparent scams. This scam involves someone calling an older adult and claiming to be one of their grandchildren. They will then say that they are in deep trouble and need help. Other versions of this scam might even involve someone posing as a kidnapper or a police officer and saying that if the older adult doesn’t pay up then their grandchild will be hurt or arrested.
Check out the article above for further information on these scams and other possible scenarios.
When talking to your parents about scams, here are a few important things that you should tell them.
- If they are told they owe money to the government or some sort of agency, then they should go speak to someone at the bank. Scammers are able to manipulate calls to look like they’re coming from legitimate numbers, and might send out what look like official documents, but anything official is never going to be so urgent, or ask you to keep the details private or pay through something like an e-transfer, cryptocurrency or gift cards. Instead, your parents should go to the bank if they ever have any questions.
- If they get a call from someone they believe to be in trouble, tell them to alert the authorities, and then to contact the grandchild or other family members. Again, scammers can pretend to be other people, and are sometimes even able to make calls look like they’re coming from a number you recognize! Although this might look scary, it’s always important to confirm a situation is true before acting out of panic.
Something else you can do is help your parents speak to their bank to see what protections are in place to help protect them against scams. You might be able to put an alert system in place that only allows a certain amount of money out at a time, which can help protect against these kinds of scams.
3. Discuss Power of Attorney
While hearing the words power of attorney can sometimes make people anxious, it’s something that should definitely be discussed when talking through your parents’ finances. But first off all, let’s dig into what the term means:
Having power of attorney basically means that you are in charge of handling the finances of someone else. Power of attorney might be given to a loved one or a legal professional, and it might happen due to something like cognitive decline or temporary illness.
Because illness can happen very suddenly, it’s important that everyone has a legal document in place that lays out who they would like to act as their power of attorney, along with their desires for how they would like their finances to be managed. Someone can appoint different people to be in charge of different areas of their finances.
Having your parents sign these documents can help them feel relaxed, knowing that their finances will be taken care of by someone they trust should there ever be a need for it. Investopedia lays out some great advice for what to think about when selecting an appropriate power of attorney.
4. Update Documents
You might be surprised at how many people, even those who are advancing in years, don’t have a will or any idea of how they want to organize their affairs as they age. While no one wants to think about falling ill or dying, the truth is that we never know how much time we have left, and it’s important that we make sure that we are not leaving behind a confusing mess of paperwork for our loved ones when we pass, or if a situation occurs where we are unable to make our own legal decisions.
This is why it’s so important that you encourage your parents to update their wills and any directives they wish to have in place as early as possible. Of course, nothing needs to be set in stone, and they can certainly make addendums if anything comes that they would like to change at a later date.
Something else to consider when it comes to documentation is what is known as a living will. A living will is similar to a regular will, except it’s activated in the event that someone becomes incapacitated, but is still alive. A living will allows someone to lay out what kind of medical intervention they would like performed, whether or not they prefer to remain on life support, and whether or not they prefer to donate their organs. Having a living ensures someone’s wishes are respected and can take the burden off of loved ones having to make some of those difficult decisions. An older adult might opt to appoint a healthcare proxy instead of having a living will. This is someone who will make their medical decisions for them in the event that they are not able to make those decisions for themselves.
5. What is Your Involvement
While many of us want to provide our parents with the most comfortable retirement we can, there is always going to be some kind of limit to your involvement, and it’s important that you have a clear boundary when it comes to how much you are going to commit, both timing-wise, emotionally and financially. Planning for old age can be difficult because no one knows exactly how long they are going to live, even if you are in a situation where your parent has been given a serious diagnosis. So while you might be OK with giving a certain amount of time or money for a few months, that same kind of commitment might not be possible six months or six years down the road.
This is something you should be open about right from the very beginning, when you first sit down to discuss finances. And ideally it’s a good idea to decide what you are able to commit to before you have that first talk. You might not be in a place where you are able to, or willing to provide financial support to your parents. And you are not under any obligation to do so. However, even if you can’t help them out financially, there are still many other ways for you to offer support with your time or organizational skills, so it’s a good idea to know what role you are willing to play as your parents age. Of course, nothing is ever set in stone, so if you suddenly find yourself a millionaire then perhaps you might be willing to offer some more support, but it’s important to plan for what your reality is right now so that you don’t have to have an uncomfortable conversation if your parent falls ill.
Even if you want to help, it’s important to know your own limits. Don’t offer more time or money than what you are willing and able to part with. If you push your own boundaries then you are just opening up the gates to resentment.
With a little bit of planning and conversation you can help your parents age with financial ease, so pick up the phone and get that communication going! Remember, it’s all about giving you more quality time together, so why waste another minute?
