Talking with your parents about their finances can be difficult and make both parties feel uneasy. After all, your parents are supposed to be concerned about you and your personal and financial health, not the other way around. But as your parents grow older, it is imperative that you get involved with their finances and understand their financial plans for the future before you retire yourself.
It can be hard to think about your parents getting older or passing away. But the Golden Years can be expensive when it comes to medical expenses, and sometimes, assisted living costs, and you need to make sure they’re properly prepared.
The first step to understanding your parents’ financial situation is to ask. This can be one of the most difficult things to do, but once you break the ice you may find discussing finances with them to be both eye opening and informative, as by then both parties are likely well versed financially.
One way to casually discuss the topic is to first talk with your parents about your own finances and ask for advice and how they have handled their own situation. This way, you are not directly asking your parents about their finances, but “learning” about financial planning via their financial past, present and future. You can use their examples as a jumping off point to dig deeper into their personal finances.
Assess the Current Financial Situation
Learning everything you can about your parents day-to-day finances can help you to understand their level of financial literacy and competence, and to make sure they are not being taken advantage of financially. If they allow, try to find out everything about your parents’ finances such as how much they are paying for monthly bills. Examine their checkbooks and look for any errors in balancing. Check their bank statements and look for abnormalities such as duplicate payments and transactions, large amounts or multiple payments to an unknown entity. Look for evidence of debt that you’re unaware of.
After this initial assessment, it is time to learn about their future financial plans and plan for the inevitable. Talking with your parents about death is never an easy task, but there are a few things that must be discussed such as finding out what arrangements your parents have made for the future as it pertains to:
You should also ask your parents where all documents containing important financial information is kept. These documents will most likely include:
If you see signs that your parents are making financial mistakes, it may be time to become more involved with your their finances. If you are not up to it, you can hire a professional to perform and monitor routine financial tasks such as paying monthly bills. If you see that your parents lack a long-term financial plan or need help with debt and financial arrangements, it may be a good idea to contact a financial advisor or a financial planner.
Your parents need to have all their finances in order and have a plan for their future. Though it is not an easy discussion to have, you must keep in mind that one day your parents may not be able to have this conversation with you, leaving questions unanswered and plans unknown.
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