Why You Should Talk to Your Parents About Their Finances

Father and his sons
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By Cameron Huddleston

Talking to your parents about their finances probably isn’t at the top of your to-do list. In fact, it probably isn’t even on your to-do list. It’s certainly not for most people.

An overwhelming majority—73%—of adults have not had detailed conversations with their parents about their parents finances, according to a survey by personal finance website GOBankingRates1. The most common reason respondents said they haven’t had this conversation is because it didn’t seem like an important topic to discuss.

Plus, talking to parents about their finances can seem awkward—even scary. In fact, nearly one in five respondents in the GOBankingRates’ survey said that fear was the primary reason they hadn’t had money conversations with their parents.

The truth is, these conversations are incredibly important. Although they might seem scary and awkward, the consequences of not having them can be much worse. Here’s why.

Why family money talks can’t wait

You likely think that your parents' finances are none of your business. However, there’s a good chance that you will have to get involved with your parents’ finances as they age.

  • Nearly half of adults ages 56 to 72 haven’t saved anything for retirement, according to an Insured Retirement Institute study2.
  • The risk of developing chronic health conditions increases as people age3—which could lead to increased medical costs and a need for support from family members.
  • As people age, they’re more likely to need long-term care. More than half of Americans turning 65 will develop a disability that is serious enough to require long-term care, according to the Department of Health and Human Services4. Most people who need care end up relying on unpaid family caregivers.5
For any or all of these reasons, your parents could end up relying on you for support as they age. If you wait until a health or financial crisis to talk to your parents about their finances, it might be too late at that point for you to help.

You might not know how to pay their bills for them if they end up in the hospital. You might not have the legal right to make financial and health care decisions for them if they are unable to do so themselves. You might not be able to help support them if you haven’t taken steps to get your own finances in order.

And if you don’t take the time to find out whether your parents have wills, you might discover that they don’t when they die. Then you and your family could end up in court fighting over who gets what.

Ways to start the conversation

Talking to your parents about their finances will give you more time to come up with a plan if it looks like they will need financial or caregiving support as they age. The question, then, is how to start the conversation in a way that won’t make them uncomfortable or put them on the defensive.

If you approach the conversation out of love and respect and use one of these strategies, they likely will open up and start talking with you.

Ask for advice

A natural way to talk to your parents about their finances is to ask for advice about your financial situation. For example, if you’re just starting out, you could ask what steps you need to take to build your credit, pay off debt or start saving for retirement. Their responses will give you insight into where they stand financially and can lead to more money talks.

Talk about your own financial experience

Perhaps you started building your credit by getting a credit builder loan or met with a credit counselor to create a strategy to pay down your debt. Maybe you recently bought life insurance or drafted a will. If you’ve recently taken steps to get your own finances in order, sharing what you’ve done can open the door to money talks with your parents.

Offer to lighten their load

You can gain insight into your parents’ finances by offering to take over a money task for them – such as setting up automatic bill payments – so they have more time to do things they enjoy. This strategy is ideal if you haven’t had any many talks with them and your parents already are showing signs that they're having trouble managing their finances on their own.

What you need to know

If your parents are willing to talk, try to gather as much information about their finances as possible. However, this doesn’t mean that you should grill them for hours. It will be easier for you and your parents if you gather a little information at a time. Here’s what you need to know.

Do they have a will, power of attorney and advance directive? A will specifies who gets their assets and property when they die. A power of attorney document allows your parents to name someone to make financial decisions for them if they can’t.

An advance directive – also called a living will – spells out what sort of end-of-life medical support they would or would not want. It also allows them to name a health care proxy to make medical decisions for them if they can’t.

They must be mentally competent to sign these documents. If they became incapacitated and hadn’t drafted and signed these documents, you would have to go through expensive court proceedings to be appointed by a judge to make financial and health care decisions for them.

How do they pay their bills? Knowing this will help avoid a financial mess if something happens to your parents—and that’s how you can frame it when talking to them. You want to find out whether they use automatic bill pay or write checks every month. If it’s the latter, encourage them to set up automatic payments to ensure that bills get paid if something were to happen to them.

Gather specific details, such as your parents’ sources of income, where they bank, what types of debt they have, types of insurance policies and investments they have. A good way to get insight into your parents’ finances and to help protect their financial well-being is to use a service such as Carefull.

The Carefull app or desktop service can be linked to their bank and credit card accounts to give you a complete picture of their finances. And it will monitor those accounts 24/7 for signs of fraud and money mistakes such as late and missed payments.

Discuss long-term care to find out if they have a plan to pay for it if they need it. The cost currently ranges from about $4,500 a month for care from a home health aide or in an assisted living facility to more than $8,000 a month for care in a skilled nursing facility, according to the Genworth Cost of Care Survey6. Talking to them about long-term care sooner rather than later will give them time to explore options to pay for care if they need it.

What to do if your parents are reluctant to talk

If your parents are reluctant to talk, try to get a sense of where they stand financially. This will give you an idea of whether you can expect them to ask you for support as they age—and give you time to prepare your finances if you want to be able to help them.

You could enlist the help of a third party, such as a family friend or even your parents’ doctor. That person might have more luck persuading your parents to talk to you because parents can be reluctant to take the advice of their own children.

Another option is to ask your parents to write down details of their finances rather than tell you. Ask them to make a list of their financial accounts, store that list somewhere safe, and tell you how and when you would be able to access it.

Bottom line

Don’t wait to talk to your parents about their finances. It might take a while to get your parents to warm up to the idea of sharing information about their finances with you. That’s why it’s better to start trying to have these conversations sooner rather than later.

Sources

  1. GOBankingRates. “73% of Americans Haven’t Had This Crucial Talk With Their Parents.” https://www.gobankingrates.com/saving-money/family/americans-discuss-finances-aging-parents-survey/. Accessed Nov. 12, 2021.
  2. Insured Retirement Institute. “Boomer Expectations for Retirement 2019.” https://www.myirionline.org/docs/default-source/default-document-library/iri_babyboomers_whitepaper_2019_final.pdf?sfvrsn=55bc4364_0. Accessed Nov. 12, 2021.
  3. Scripps. “10 Top Health Concerns of Baby Boomers.” https://www.scripps.org/news_items/5475-top-health-concerns-of-baby-boomers. Accessed Nov. 12, 2021
  4. Office of the Assistant Secretary for Planning and Evaluation, HHS. “Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief.” https://aspe.hhs.gov/reports/long-term-services-supports-older-americans-risks-financing-research-brief-0. Accessed Nov. 12, 2021
  5. LongTermCare.gov. “Who Will Provide Your Care?” https://acl.gov/ltc/basic-needs/who-will-provide-your-care Accessed Nov. 12, 2021
  6. Genworth Cost of Care Survey. https://www.genworth.com/aging-and-you/finances/cost-of-care.html. Accessed Nov. 12, 2021

About the Author

Cameron Huddleston is the director of education and content at Carefull, the first service built to protect aging adults’ daily finances. She also is the author of “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances” and was a caregiver for 12 years for her mom, who had Alzheimer’s disease.

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Written on November 22, 2021
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@self.inc.

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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