Having a discussion with our parents about their finances is hard. For us, it may bring back memories of those uncomfortable teenage sit-downs with mom and dad. For mom and dad, it can bring up a range of emotions:
- Suspicion: “Why are you asking?”
- Anger: “It’s none of your business!”
- Fear: “What if my kids realize I’m not in control as I pretend to be?”
- Relief: “It’s becoming more of a burden, but I’ve been too afraid to ask for help”
Despite the difficulty, it is a discussion you must have. Much like Long Term Care Insurance, the time to have it is before you need it! Engaging your parents in a dialog about their finances helps ensure that they can be independent and helps you keep informed of their situation, so your parents can lead the life they want and you can have peace of mind. An easy place to start is with the cash. That’s the easily accessible stuff that sits in their checking, savings and credit card accounts. I started with 5 simple strategies.
- Review the mail. Take note of solicitations from charities. Talk with your parents about their goals for charitable contributions. Encourage them to keep it simple. I found my dad made at least 10 gifts to the same charity over the course of 1 year because he responded to each “thank you” mailing with a check! A time honored guideline is 10% of net income-anything more isn’t necessarily bad, but should warrant a discussion.
- Review credit card statements and run an annual credit report. Consolidate credit cards to the ones with the lowest interest rate. Take note of and follow up to resolve any suspicious activity. Credit card theft is often the first portal for identity thieves. For older adults, 2 major credit cards should be enough.
- Watch for unsolicited checks made out in their name. Banks will cash them and then hold your parents responsible when the fake is uncovered. By then, the issuer may have access to your parents’ account information, placing their savings in jeopardy.
- Secure critical information. If your parents have a home safe, make sure it’s locked and that you have a list of its contents and the combination. If they use a computer make sure they do not put their account numbers and passwords in plain sight. Emergency call lists with other critical information should be posted visibly, but Social Security Numbers and PINs should not.
- Establish a “worry free spending threshold.” Before spending a large amount of money or signing a contract, you should encourage your parents to review the purchase with a family member or trusted friend. The threshold you agree upon will depend on your parents’ financial situation and should give them enough wiggle room to not feel like they’re on an allowance, but give you the comfort to know that a bad decision won’t break the bank.