Helping Aging Parents with their Money
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Among several other responsibilities that you must fulfil for your parents, one of the most essential ones is to help them manage their money. Not because they are not wise enough to make their own decisions, but because they might need help adjusting to the changing financial planning scenario. Unlike the former years when your parents were the flag bearers, today’s investment and financial planning has taken a 360-degree turn. Everything today is governed by technology. There is more risk, low stability yet higher returns, flourishing trajectories, diverse options, ease of investment, and a completely changed financial planning environment.
In addition to this, the cognitive abilities of a human being also tend to decline with age, making it more difficult for parents (especially people in their late 50s, 60s, and beyond) to manage their money effectively. Hence, it becomes a fundamental responsibility of the child to help their ageing parents with their money.
Here are some simple ways you can achieve this goal:
1. Communicate effectively
Money matters are sensitive for everyone. Therefore, it is advisable to evaluate the situation before jumping in. Assess if your parents need your help and what kind of help can be useful to them. Moreover, do not be too curious, and try to be patient. Allow them to talk and make them comfortable. Instil confidence and ask them to share only as much information as they are willing to do. Be open and inform them about your purpose for asking about their finances, ensuring them that they can benefit from an open and honest conversation.
2. Organise financial information
Once the communication barrier has been broken, the first step you should take is to smartly organize their financial information. It is advisable to pen down all their information in one place. This can include information on all their bank and investment accounts, their name, important account numbers, passwords, etc. You should also include insurance information like policy numbers, nominees, premiums, maturity dates, etc. Keep this paper locked and in safe custody. It is also beneficial to list down all loans, regular expenses, outstanding debts, and other details, to allow things to flow smoothly. It is advisable to check and renew their policies and plans whenever required to ensure everything is up to date.
3. Assess money management
Depending on your parent’s age and health condition, they might need your help in everyday money management too. When such a time comes, sit with them and enquire about their daily needs, regular taxes, debts, loans, household expenses, medical bills, etc. Help them create a budget and automate payments which are due monthly or weekly. If your parents are willing to hand over some authority, you could take over the responsibility to pay their bills too.
4. Automate as much as possible
The era of technology, where everything is easily accessible, transparent, and organized can be very helpful in managing money. Try to educate them about the forms of technology that can help them with money management and financial planning. You can educate your parents on how to update and check their bank information, credit balances, insurance details, etc. on the internet. You can also set up automated payments for loans, insurance premiums, investments, etc. Teaching them how to manoeuvre their way in the virtual world can help them monitor and manage their money by themselves. You should also help your parents remember their passwords. If they are forgetful, make sure to keep a copy of their passwords in a safe place.
5. Know important financial accounts and insurance information
Even if your parents are not comfortable disclosing the amount and intricate details of their account, it is advisable for you to at least know what kind of accounts they have. Try to consolidate accounts that are scattered across financial organizations for future ease. Talk to your parents about their insurance policies, premiums, nominees, etc. Increased transparency can help ensure that premiums are regularly paid and terms are diligently followed, so that when the time comes, claims and withdrawals can be made without any hassles.
6. Provide wise financial advice
As children, your parents expect you to provide them with sound financial and investment advice. Make sure to educate yourself about the changing economic policies and market fluctuations that may affect your parents. It is important to lay wise advice on the table. Since older people have a low-risk appetite and prefer sound but stable returns, you can suggest suitable profitable investment options. You can also seek advice from a professional financial advisor to provide the best guidance.
7. Plan for long-term expenses
While making investment decisions for parents, it is important to keep in mind their long-term expenses. Analyse their current source of income, present expenses, as well as future needs, and then decide on the right investment option and the amount of money that needs to be invested. As people age, their expenses tend to increase in terms of medical costs, personal care, etc. It is important to factor in all these aspects and account for all possible emergencies before making any decisions.
8. Prepare for the future
In case, your parents do not have sound policies or investments to help them safeguard their future, it is beneficial to advise them to get some now. You should look out for specific plans that complement the unique medical conditions of your parents. While making a decision you must also consider their current income, expenses, future needs, etc. Moreover, if your parents do not have a will or an estate plan, convince them to start the process. In case, your parents suffer from a critical illness or other progressive diseases, it is advisable to get a living will or a power of attorney to ensure proper planning and execution.
9. Maintain the flow of communication
Helping your ageing parents with their money is not a one-time activity. You must check on them regularly and keep yourself updated with any changes or new requirements that they may need. You should also provide them with timely updates and keep them informed of where their money is being spent, saved, or invested.
To sum it up
Money matters are sensitive topics, so ensure that you initiate a humble and easy conversation directed solely for their benefit. As children, you may have many responsibilities towards your parents, and helping them plan and manage their money is one of them. It is important for your parents to understand your motive, so they can place their confidence in you and trust your advice to secure their future.
As much as you want to help your parents, managing money for other people can be confusing and time-consuming. You can reach out to financial advisors for help in guiding your parents with their money.