Approaching your parents on the topics of money, investing or general finances can be challenging. As they begin to age, though, it becomes increasingly important that you have these conversations.
One day, you may have to take over their finances. This can be a fairly easy process or an uphill battle, depending on the actions you take now. Here are a few tips on how to begin the conversation, what questions to ask, and how you can offer to help out.
Start the conversation
If you’re not sure how open your parents are to receiving your assistance, you’ll want to broach the topic tactfully. Try testing the waters by speaking in hypotheticals, or by using examples, such as, “Did you know that the Johnsons’ kids helped them organize their finances and rebalance their retirement portfolio?” Make it clear from the outset that you’re not trying to take control of their money, only that you’re trying to make things easier for them.
Find out where they keep important documents
Hopefully, your parents have done a good job organizing their finances. If not, you’ll have a bit of work to do. For the most up-to-date information, try finding documents and policies online and print them out. Then, purchase an organizational system to store everything, including any and all financial records along with contact lists for all pertinent professionals, such as doctors and financial advisors. For online passwords, suggest using password management software such as LastPass rather than writing them down (of course, having a backup, offline copy of your passwords is always a good backup plan). Help your parents adopt this system and everyone’s job will get a lot easier.
Learn about their investment portfolio and debt
You should get an idea of what’s in their retirement portfolio. Also look into whether they have credit card debt, which may be putting a strain on their monthly finances. If they do have debt, you may want to suggest ways to pay it off. If it’s been a while since they rebalanced their portfolio or tallied up their debt, offer to help, or suggest the services of a financial advisor.
Find out about automatic deposit and payments
Learn about any automatic deposits they may have coming into a bank account, like pensions and Social Security, as well as payments, such as monthly bills set up to auto-debit from a checking account. It’s important that you know this information in case you have to take over their banking. You could also use this opportunity to take a look at what they’re paying for monthly services and explore ways to save by switching providers or bundling.
Ask about health and life insurance documents
Make sure you know about any health and life insurance policies, trusts, wills, and living wills, and be sure a close member of the family has power of attorney – especially if one or both parents are in failing health. It’s very important to handle this part of the conversation gently. You don’t have to ask to actually see the will or trust. Rather, simply inquire as to which documents are in place and where they’re kept. The important thing is that you can access them when the time comes.
Once you know where to find all this information, you should have two objectives. Be sure it’s organized and easily accessible, and find out if your parents may be wasting money or – worse – if they may be getting scammed.
If they aren’t using the services of a trusted financial advisor, it might be worth paying a one-time fee to have their finances reviewed. And if they have significant, active investments, they may want to bring on an advisor full-time.
Ultimately, it’s important to do everything in your power to protect your parents’ money while they’re still here. And in the event of their passing, you’ll want to ensure you can make sense of everything.
What do you think you need to know about your aging parents’ finances? What have you discussed with them so far?
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