Aging Parents & Finances: A Financial Talk Every Family Should Have

As our parents age, it’s natural to start worrying about their financial well-being.

But how do you approach a conversation about money with the very people who raised you?

We get it. It’s awkward.

According to a Bankrate survey, “Americans think money is more taboo to talk about than their political or religious views.”¹

Specifically, “Only 38% of U.S. adults are comfortable discussing their bank account balances with family members or close friends, a smaller percentage than those comfortable discussing their love lives (47%), credit card debt (52%), weight (71%), political views (78%), religious views (81%) or health (81%).”²

With the holidays right around the corner, we encourage you to lean into this taboo financial conversation.

And be thankful that you have an opportunity to talk to your parents about their finances before you are forced to.

Read on to see why it is so important to talk to your parents about their finances sooner rather than later.

The Right Time to Talk to Your Parents about Their Finances

There may never be a moment when you feel ready to talk to your parents about their finances – it’s a challenging subject for anyone. 

But waiting too long can have serious consequences.

According to a study by Home Instead Senior Care, “Given the severe consequences of waiting too long to have this critical conversation, if your parents are approaching 70 and you are approaching 40, you should have ‘the talk’ about critical aging issues.”³

In other words, if you are part of the sandwich generation, it’s time to have this conversation.

“The sandwich generation consists of adults with a parent 65 years or older who are raising a minor or providing for an adult child.”⁴

Those in the sandwich generation are having to take care of their own children, their aging parents, and themselves.

“On average, 48% of adults are providing some sort of financial support to their grown children, while 27% are their primary support. Additionally, 25% financially support their parents as well. Some of the adults living in this sandwiched generation face financial problems regularly, having to support three generations at one time.”⁵

For those caring for children while nearing retirement, there’s a real possibility of also needing to care for your parents. 

That’s why it’s crucial to discuss your parents’ finances sooner rather than later – so you can also prepare.

While it’s recommended to have this conversation if you’re around 40 and your parents are around 70, it’s also wise to initiate it if a parent is diagnosed with a life-threatening illness or begins to show signs of cognitive decline.

Clarifying Expectations Is Critical

In a Fidelity Investments survey, 60% have seen family members or friends lose their ability to manage their daily finances as they age, and 40% said they have had to help manage their parents’ finances.

Yet only 9% of those surveyed think they could end up in a similar situation.⁶

As much as we don’t want to think about it, our parents are getting older, and something could happen that puts us (their children) in the driver’s seat.

We don’t know what the future holds.

If your parents are critically ill, would they be able to afford healthcare or long-term care? Or are they expecting to move in with you? 

If your parents pass away, do you know what will happen to their property? Do you know who will be put in charge of executing their estate? 

Consider these findings from a Fidelity Investments study.

• 92% of parents expect their children will assume the role of executor; however, 27% of children identified as executor didn’t know this was expected of them.
• 69% of parents expect one of their children will help manage their investments in retirement; however, 36% of kids identified in this role didn’t know this was expected of them.
• 72% of parents expect one of their children will assume long-term caregiver responsibilities in retirement if needed; however, 40% of children identified as the caregiver didn’t know this was expected of them.⁷

Unfortunately, many adult children find themselves blindsided by their parents’ financial situations or end-of-life requests because it has never been spoken about.

Don’t let this happen to you.

While your parents are still able, have the difficult conversation with them.

What You Need to Know about Your Parents’ Financial Situation

Tell your parents you’d like to discuss their future plans so that you will be better able to assist them when the time comes and honor their wishes.

Then, direct the conversation to specific topics related to their financial situation.

• Retirement Plans: If your parents have not yet retired, ask them about their retirement plans. When do they expect to retire? Where do they plan to live during retirement?
• Retirement Income: What is their plan for income during retirement? Do they have adequate 401(k) savings? How much do they anticipate receiving from Social Security? Do they have any investments that will provide income or any additional income streams?
• Needs: What will they need from you? For example, do they have long-term care insurance, or are they planning to move in with you when the time comes? Do they have enough savings or income to cover costs? Do they have debt they will need help with?
• Inheritance: While you don’t want to appear greedy, it is wise to ask your parents about any potential inheritance. You don’t want to mistakenly believe you will be receiving an inheritance to find out that not only is this not true, but you will need to sell the family home to cover your parents’ debts. Asking about this possibility is uncomfortable but necessary.

Estate Plans and End-of-Life Life Wishes: Ask your parents if they have a will in place and if there are any end-of-life documents you should be aware of. For instance, some parents have already purchased a grave plot and have set money aside for funeral costs in advance so that their children will not have to. Then again, many parents have not, and it is up to their children to make these arrangements. While you have the opportunity, have the hard conversation. It will be much easier to navigate ahead of time instead of during the time of loss.

Additional Tips for the Difficult Conversation

It is challenging to talk to your parents about their finances, but it is important.

If the conversation leaves you feeling frustrated, don’t give up. Your parents may not have all the answers to your questions yet.

Give them some time, and encourage your parents to meet with a financial advisor.

Note –  If you are already aware that your parents will need financial assistance from you, it is also wise for you to speak to a financial advisor – especially if you are a part of the sandwich generation.

Keep the conversation going. It doesn’t have to be a one-time discussion over dinner.

The overall goal is to let your parents know you are trying to make sure everyone is on the same page so you can help one another.

Stacie Irving explains, “No one is excited to have these conversations, but everyone feels relief once the door has been opened and a financial plan has been made.”⁸

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Sources

1. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
2. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
3. https://www.prnewswire.com/news-releases/study-finds-most-families-wait-too-long-to-begin-aging-conversations-270894401.html
4. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
5. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
6. https://getcarefull.com/articles/why-you-should-talk-to-your-adult-children-about-your-finances
7. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/Family-Finance-Infographic.pdf
8. https://www.care.com/c/financial-conversations-to-have-with-aging-parents/

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