There was a time when your parents introduced you to the fundamentals of money. They gave you a piggy bank. In your teens, they encouraged you to get a job to learn the value of a dollar. Now, things have somehow come full circle, and the roles have changed. It’s now up to you to help your aging parents keep their money in order.
Why? For many Americans, retirement coincides with needing help managing finances. One recent study showed that financial decision-making peaks around age 53 and then gradually declines, even among healthy individuals.
The challenge is that most aging adults don’t think they’ll ever reach that point.
A study by Fidelity Investments revealed that while only 9 percent of older adults (aged 50-80) surveyed felt they’d ever lose the ability to manage their day-to-day finances, 60 percent admit having witnessed it happen to a friend or family member – and 40 percent actually helped manage their own parents’ finances.
To compound this, many children find it difficult to talk to their parents about finances. It’s hard to talk about money – especially with family members. And in many families, money is a taboo subject.
Nonetheless, doing so is important because it can keep parents safe from elder scams and also protects family assets and relationships. If you are the trustee of your parents’ estate, it’s even more critical for you to have a strong handle on their financial, estate-planning and personal affairs.
Here are some tips to having the money talk with your aging parents and make it as stress-free as possible for everyone involved.
Just like most things in life, planning ahead will serve you well. If you have siblings, fill them in on your intentions and see if they want to get involved. Think about what you want to learn and hope to achieve. Are there any specific things you’re worried about?
Put together a list that covers everything you want to talk about. Most planners advise to focus on the long-term issues first. Those include investments and estate planning, and making sure all beneficiaries are designated on all accounts. You should also confirm there is a current and complete will, a health-care proxy and a living will.
Set a date
To prevent yourself (and your parents) from avoiding the talk, set a date to have the conversation. Bringing up the matter doesn’t have to be awkward. Acknowledge that it’s a topic that may make everyone a little uncomfortable, but that it’s really important to address.
For example: “I’d like to have a discussion about money that’s kind of delicate and may be difficult for all of us. When is a good time?”
Make it casual
The last thing anyone wants to feel is threatened. Tell them nothing’s wrong. You just want to make sure they’re making the most of their money and have things set up correctly.
Assure them that you want to honor their wishes for their finances and that you’re not trying to take anything away from them.
Share your intentions
Make sure your parents understand this has nothing to with their will and who gets what. Tell them they don’t even have to share those details with you. Also, emphasize the link between their financial decisions and your own financial planning. For example, if they plan to pass on the vacation home to you and your siblings, it makes sense for your generation to start planning for this event to ensure you’re prepared when the time comes.
This helps level the playing field and convey that having this “difficult” conversation is in the best interest of everyone.
Ask the hard questions
No one wants to think about or talk about death – especially their own! But end-of-life planning is critical and it’s important that you – as the child – understand your parent’s wishes and expectations.
Who do your parents want to entrust with financial and personal decisions if they are incapacitated? Too often children spend down all their parents’ wealth for medical interventions that the parents never wanted.
Talk about scammers
It’s a good idea to occasionally brief your parents on current scams around the country – unscrupulous people going door to door, calling on the phone, sending emails and so on. Make sure they are aware that legitimate companies don’t contact people through email or phone asking for sensitive information. And ensure them that you can help should any questions ever arise on their end about the legitimacy of a company’s request. You’re only a phone call away.
Don’t give up
If your attempts for a conversation are rebuffed, don’t give up. At the very least, talk about the importance of having the talk another time and try to schedule a date in the future. Tell them how important it is for you to be informed about their planning so you can make every attempt to honor their wishes. You could even offer to bring a financial professional into the conversation to facilitate things.
Talking about money is never easy – but it is well worth the effort. If you’d like further guidance on bringing up the topic with your aging parents, MidWestOne has many expert bankers who are more than happy to help. Just contact us!