Our parents give us so much, don’t they? And they spend so much of their working lives supporting us, their children, through our upbringing, our difficult teenage years, and then becoming independent adults. No doubt they’ve helped us significantly since, as well. But the time inevitably comes when we have to start thinking about when and how to help parents with their finances.
We may have only just seen our own children off into the wider world and helped them prepare financially; we might have helped them into college or given them a helping hand into the property market. Often we forget that we need to turn the other way too; our parents can be overlooked, and in need of help managing their money.
Financial Caretaking
In the face of worries about healthcare or living arrangements and trying to maintain a standard of living that we’d like for ourselves, we all hope to see our parents aging with dignity and without unnecessary complications. And while I see a lot of reluctance to consider these things, pre-empting problems before they happen is a key strategy in limiting the damage they can cause later down the line.
Deciding when to quit driving, for example, is an extremely tough decision for our parents to make – it’s seen as a loss of freedom, a loss of control, an admission of weakness. Deciding to let others intervene with their financial matters is just the same.
But it need not be difficult – the single most effective way to help parents with their finances is to think about it early. Have those difficult conversations and face some of the “what-ifs”, enlist help and put a strategy in place.
Here at Mosaic Wealth Strategies, we spend a lot of time with our clients navigating difficult transition periods, and this is just another one of those. With some careful forethought and proactive planning, we can help you to become your parents’ financial caretakers and give them the peace of mind they need.
Behavioral, Cognitive and Financial Risks
There’s no doubt about it; we owe our parents a significant duty of care. We need to make sure that they are making the best financial decisions that they can as they age, but in many situations their ability to do this is compromised – and this isn’t always that obvious.
Our parents may well become less physically mobile or cognitively less able to deal with their affairs, and both of these can leave them extremely vulnerable. According to the Alzheimer’s Association, one in ten people over the age of 65 show signs of dementia, and by the time elderly people pass away, this figure increases to one in every three.
It’s not just memory loss associated with dementia that puts elderly people in a very vulnerable state but also what’s known as executive function loss. This can refer to decline of their organizational skills, including how they go about making plans (even down to planning an easy evening meal) and then how they might carry out those plans.
It’s also about evaluating information and then how to use that information, and it affects self-control, emotional reactions to situations, as well as moral reasoning and decision making.
So a parent with even very mild age-related dementia symptoms might start behaving in a different way, believing their behaviour to be entirely normal and justified. This is how they end up extremely susceptible to scams, fraud and other financial abuse.
The most self-reported form of abuse in older people, according to the National Council of Aging, is financial abuse and this can be at the hands of friends, caregivers, family members, irreputable financial advisors or fraudsters. It’s a growing crime in the United States, and the Elder Financial Protection Network provides a list of the types of misdemeanours directed at elderly people that we need to be protecting our parents against.
How to Help Parents with their Finances
Dr Christopher Heye of Whealthcare Planning and his co-authors carried out a study of cognitive function and its impact on financial decision making. They recommend that having good, trusting streams of communications between health professionals, relatives and financial advisers makes a strong team to maintain an individual’s financial wellbeing as they age.
Early on, protect yourselves with a family agreement. When everyone is able to do so, make a written plan of what will happen in the worst case scenarios. Have a power-of-attorney plan in place. Be clear, be transparent, and be accountable – this means having more than one person help your parents with their finances.
Having a financial planner as part of your team will keep things simple, and will protect your parents’ financial wellbeing as they age. An adviser can help your parents simplify their assets,
In my practice, I use tools from Whealthcare Planning with all of my clients once they turn 60, including the Financial Caretaking Plan, the Whealthcare Risk Profile and the Proactive Aging Plan. And we can apply all these to help parents with their finances, too.
Communication and Kindness is Key
The future is uncertain and that can make it feel frightening – it feels easier not to think about it now, right? But knowing when and how to help parents with their finances as they age can protect you all from worry, from mistakes, from abuse.
And while it might be difficult at first, I’m passionate about making conversations about this feel completely normal. It is never too early to get some help so please, reach out today and together we’ll put some plans in place to help your parents age with the dignity they deserve.
