Finances are something not even retirement can render moot.
Discussing finances is difficult for many people, and when you're an adult child of aging parents, discussing your parents' finances is an extra-sensitive task. However, having a frank, compassionate discussion about money is much easier before health worries or financial mistakes create an emergency.
As people age, risk for difficulties with memory and reasoning increase, and evidence of these difficulties may show up in financial transactions. It's critical that you gently establish a dialogue with your parents and reassure them that they can retain control over their finances even if they receive assistance from you or your siblings. Doing so before problems arise can save unnecessary expenditures and maximize chances that finances will be handled the way your parents want them to be. Here's how to create a budget for your aging parents.
Broaching a Difficult Subject
Some parents may be unwilling to discuss financial details, and if this is the case, you should at least ask where their financial documents are kept in case there's an emergency. Find out where wills are kept and whether they have advanced medical directives so that their wishes can be carried out if they are incapacitated. As the adult child of aging parents, you should know where to locate:
•Parents' social security numbers
•Income information, including Social Security, annuities, and retirement plans
•Bank account numbers
•Safe deposit boxes and keys
•Contact information for attorneys, doctors, insurance agents, etc.
If you have to take over handling of your parents' finances, you should keep their money separate, be open and honest about their financial situation, and give them as much control as reasonably possible.
Working Online Has Many Advantages
Online banking can be an enormous help to those who are helping aging parents manage their money. You can set up online banking in their presence so they can see what you're doing, and you may need to teach parents how to access online banking information. This may meet with resistance from someone who balanced her checkbook by hand for decades, but it can make life much easier for everyone. A side benefit to showing parents how to use online banking is that assisting parents with internet use can help them learn ways to stay more connected with you, your siblings, their friends, and grandchildren.
Keep Siblings Informed
If you haven't discussed parents' finances with siblings, do so. Many family squabbles begin when one sibling thinks another is hiding something, and such conflicts can become contentious. Even if one sibling manages a parent's day-to-day finances, other siblings should know what's going on. You may need to build trust with siblings, and you can do this by keeping things low key. Perhaps once a month you can meet for coffee and go over bills and savings. The social aspect makes discussing finances easier and lets parents know they can trust you to protect their interests.
Create an "Early Warning System"
Sadly, many older people are taken in by email scams and phishing attacks. If your parent is new to email, see if you can create a "white list" of contacts and route other emails to a "junk" box. Ask parents to set up automatic notifications that let you know if they miss a utility or bill payment. If you or a sibling wants access to a parent's bank account, make sure it is a "convenience account," and not joint account ownership. Joint ownership of the account can put the account at risk if someone named on the account has debts. In other words, you don't want Visa to come after your parents' account when your sibling can't pay a credit card balance.
The big advantage of having access to parents' bank accounts is that you can spot suspicious activity before it becomes a bigger problem. Look for duplicate payments, unusually large charitable donations, or excessive credit card balances, and try to determine why the expenditures are happening.
How to Create a Budget
You can make a monthly budget on paper, on a spreadsheet, or online. You need a monthly income estimate and a list of recurring payments, including:
•Rent or mortgage payments
•Credit card bills
Track what parents spend for several weeks to get an idea of what their true expenses are. Once you know their typical monthly expenditures, you can budget for the future.
Mint.com has free, powerful, flexible budgeting tools that let you set up and customize an automatic starter budget, track and compare spending, and even roll over financial information into the following month's budget. If your parent wants to see a budget on paper, you can print it out for them. When parents see exactly how to create a budget with these tools, you build trust and make those financial conversations much easier.
People are generally used to seeing parents as being in charge, and it can be emotionally difficult when the tables turn and they need help. But helping elderly parents handle their finances can be done with dignity, openness, and trust, and it can help prevent serious problems should they make financial mistakes or suffer a health setback. The time to help create a budget for your parents is before they lose their capacity to make those decisions for themselves.