Many adult children often worry about the ability of their aging parents to manage money and financial affairs, and for good reason. Statistics from The National Council on Aging show that 29 percent of homeowners over the age of 62 have difficulty or need help with instrumental activities of daily living, which includes needing help to manage their money.
Yet many adult children would be unprepared if they had to suddenly take over management of a parent’s money and finances.
There are many issues to consider when it comes to helping aging parents manage their money. A good place to start is to answer the following questions.
While Parents Are Still In Good Health
Find out where important papers are kept and if wills and other documents are up to date. Be sure to note and codes to lock boxes, location of keys and specifics on all account numbers.
Questions to ask:
- Where do they keep their financial records?
- Who do they bank with?
- Do they have a professional money manager, account, lawyer, etc.?
At The First Signs of Difficulties:
Now is the time to sit down and open a discussion about helping out their finances. Start with a review of their income and expenses. Be respectful. Make sure they understand you’re not trying to take over but offering a helping hand.
Questions to ask:
1. What is their annual income and how is it derived?
Do your parents receive a pension check, IRA, Social Security or other sources of income (e.g. disability or alimony)? Do they have dividends coming in from investments?
2. What are your parent’s monthly expenses?
Gather information on their mortgage, credit card debt, utilities and other expenses. Also note the usual dates that bills are mailed (in case they get waylaid in the mail or misplaced by a parent).
3. How do they pay their bills?
Do they use online banking, paper checks or visit their bank when a bill is due?
When Your Parents Need More Help
When an occasional review of their accounts is not enough, adult children may need to take on a more active role. In many cases, it is a good idea for at least one of the children to get online access to their bank accounts to see how things are doing and add themselves onto their parents’ accounts as a person of interest.
If your parents pay bills via check, you can start writing checks for them to sign. Arranging to do this at their house keeps them involved in the process as long as possible. If that is not convenient, suggest a switch to direct deposit for their income and automated billing for expenses.
Now may also be the time to consider hiring a professional money manager.
Most aging parents don’t have a financial expert as their helper but simply rely on a family member they trust. Bill paying is usually a simple task for adult children to manage but if tax, estate or other issues are a concern, most adult children do not have the financial expertise to manage complex financial affairs. The American Association of Daily Money Managersis a good resource to help you find qualified and vetted money managers for your parents.
The Bottom Line
Adult children with aging parents that need help with their finances should not hesitate to discuss these issues with them. It is also important for children to allow their parents to retain as much of their independence as possible. Use the tips above to help you start the discussion and help your parents make the best decisions.