Despite the fact that a majority of people will find themselves helping their aging parents in some form or another, many are not prepared to deal with the challenges. Caring for elderly parents is an important and rewarding role to play in your family. It does, however, often lead to some complex and stressful situations and can have an impact on personal and family finances. So it’s smart to be as prepared as possible. This article lays out some things to consider.
Start at home
While it is easy to agree that caring for a parent or parents is of highest priority, being financially stable yourself is a critical step in the process. Having your own personal finances in order will allow you to better evaluate when and where it is appropriate to spend your money on your parent’s needs.
While parents should have savings set aside and their retirement in order, this might not always be the case. Being able to help financially can be a life saver if circumstances require. Plus, you can use the personal finance skills you develop from managing your own money to assist your parents if they need it as they get older.
Prepare for a conversation about family finances
Having a candid conversation with your parents about topics like personal finances, their health, insurance coverage, and their estate can be hard. Parents are used to providing care and support for their children, and reversing those roles can be difficult.
Give your parents and other family members time to evaluate the topics that may arise in an upcoming conversation. Before you sit down to discuss your parents’ financial future, make sure you’re prepared and be sure to communicate the following ideas:
- Share your willingness to help.
- Stress the importance of having a formal discussion about specific aspects of your parents’ financial situation.
- Offer up a future date and time that allows everyone to participate in the conversation.
- Invite other family members who may be helpful.
- Ask your parents’ permission to review some of their accounts and documents prior to the conversation.
- Crunch some of the numbers—doing basic calculations and estimates — before sitting down together. This can allow for a quicker, more direct conversation.
During your discussion, take notes so you can remember and follow up on any concerns or questions that come up as you talk. That way you can provide more information or alleviate worries in subsequent conversations. Also, don’t hesitate to ask for financial advice if needed. Touching base with a financial expert or financial counselor at your credit union can help take some of the stress out of your decisions.
Timing is everything when it comes to talking to your parents about their finances. Don’t wait until things are critical. Have this conversation prior to their retirement or before an illness or injury befalls them.
Begin having early conversations about what your parents want or intend their financial future to look like. Help them see that you can and want to help. Even if you think they should know, they may have some questions or concerns.
As time passes, you may begin to see more and more opportunities to support your parents’ continuing financial success. Helping them reach savings and contribution deadlines and goals in earlier years can prove invaluable later when these funds are being paid out.
Talking with your parents is important and setting aside time during a holiday or visit might be appropriate. While discussing finances over your holiday dinner isn’t recommended, a long weekend or vacation time at their home could prove to be a good time to sit down together.
You will need to know where your parents stand when it comes to a 401K, Social Security, a possible pension, and other items. You should also ask them the following questions:
- Do they have a will and a living will?
- Have they designated anyone as their power of attorney?
- What credit union/financial institutions do they use?
- What types of accounts do they have?
- Where do they physically or electronically save their financial documents?
- Do they have a valued financial advisor in place?
- Who is their accountant, their lawyer, and their doctor?
These documents need to be drafted while your parents are still competent, so it’s never too soon to get started.
If you feel uncomfortable asking these questions directly, maybe share some insight into your own financial or estate situation—then follow with asking about their current situation. Often in the worst-case scenario, a trained financial professional like a certified financial counselor at a credit union or a financial advisor may be able to persuade your parents to share some of this information.
The Bottom Line
At the end of the day, remember that you are not managing your own money or assets — you are supporting your parents. This will allow you to act in their best interest and maintain clear boundaries.
It is always important to start with a clear conversation. These conversations can be awkward and difficult, but they can save you and your family time and money, and — more importantly — will help maintain the health of one of your most valuable family relationships.