The Economics of Aging: When It’s Time to Help Manage Mom and Dad’s Finances

It’s awkward. It’s uncomfortable. And it’s absolutely necessary. The average American is about as interested in talking to their aging parents about money as they are in sleeping with rattlesnakes but it’s something we all need to do sooner rather than later. Why? According to one elder care expert, families cover 50 percent of nursing home care, with adult children contributing an average of $10,000 annually to that expense.

It’s also important to get informed about your parents’ finances, so you’re prepared when the time comes to manage their estate. Lauren Livick, a personal finance expert at Umpqua Bank, explains, “It’s important to have ‘the talk’ with aging parents about finances because—as blunt as it sounds—their money will be your money someday.”

And if your mom or dad ends up with a prolonged hospital stay at the end of their life, chances are there will be a big medical bill to go with it. According to one Kaiser Foundation study, 25% of total Medicare spending occurs in a patient’s last year. If you don’t have supplemental coverage, the costs can really add up.

As tough as it is to start these serious conversations, it’s important to have them early, so you’re prepared if something should happen to your parents. Says Livick, “The last thing you want is to be stressed about finances, when you should be spending time with family.”

What’s more, she says, “Finances change when you reach a certain age. There are changes in income, and often there are additional expenses like medical bills that can catch you off guard. It’s best to prepare for that.”

Let’s Have “The Money Talk”

If your parents gave you “the facts-of-life talk” when you were growing up, you might be worried that “the money talk” will be similarly awkward. But there are a number of ways you can approach it that can put them at ease:

• Keep It Simple
  No need to make it feel like a big deal. You don’t need a large conference room or a team of lawyers. A simple kitchen table will suffice. Just say, “Mom, Dad, I want to talk to you about helping you manage your money.”

• Make Them Feel in Control
  For as long as possible, your parents should remain in charge of their own money. Like driving, managing money is one of the last things a person wants to give up. It helps to keep them active and feel like they’re still in charge of their own lives.

• Let Them Know You’re There to Help
  The moment they’re no longer able to balance a checkbook or remember where all their money and investments are held, let them know you’re happy to keep track of it all so they no longer have to worry about forgetting anything. Even if your parents are confident money managers, there’s a good chance they aren’t as confident with twenty-first century money management tools as you are. One approach is to suggest that it’ll be easy for you to manage their accounts online, right alongside your own.

• Personalize Your Approach
  As Livick explains, “Everyone has a different relationship with their parents, so my best advice would be to put yourself in their shoes and think about how you would want to be approached with the topic.” After all, money is more than cold hard numbers. It’s a very emotional and personal subject for many people. With a little compassion and an open mind, you and your parents can avoid potential stress and maybe even become closer.

So now that you’re ready, where do you start? It can help to prepare a simple checklist.  That way you can take full inventory of your parents’ assets to ensure you’re seeing the whole picture.

The Checklist

• Bank accounts and savings accounts

• Mortgages outstanding

• Credit cards and other personal debt

• Brokerage account info

• Insurance policies (life and health)

Handling the Estate

Finally, if your parents haven’t already done so, you’ll need to create a will, a living will and determine power of attorney.

• Create a Will
  Like taxi rides and dog walking, there’s more than a few apps on your phone that make it easy to create a will. Rocket Lawyer and LegalZoom are two of the most popular ones. Walking your parents through the process is relatively easy.

• A Living Will
  Determine who will handle all the end-of-life medical decisions.

• Power of Attorney
  Pick the person you want to act on your behalf to handle all legal matters if your parents can’t act on their own behalf.

Getting old is not for the faint of heart. And managing money is the last thing a person wants to deal with when time is running out. Having “the money talk” now means that when the time comes, you and your parents will be free to focus on the things that really matter.

“In the end, people don’t view their life as merely the average of all its moments…For human beings, life is meaningful because it is a story,” writes Atul Gawande in his book Being Mortal.

By choosing to be proactive and talk to your parents about money sooner rather than later, you can ensure a financial crisis isn't part of that story.