The topic of finances can be an uncomfortable and daunting conversation to have with your parents, but it’s necessary. If anything were to happen to them suddenly – heck, even if they live long, happy lives – having your loved ones’ finances organized and their wishes clearly defined will help to make the hard times when they’re gone a little bit easier.
Knowing this can be a difficult conversation, we have mapped out why, how and when to talk to your parents.
Why is this an important conversation?
Aging is inevitable and, with age, comes an increase of unexpected events. This is why it’s important to start having a conversation about the status of your parents’ finances. Parents may not want to be a burden to their children or family, so it’s understandable if you’re hesitant to begin the conversation. Your parents are still in control of their lives, but you can offer to help them plan for their future. You may feel like you have to tiptoe around the topic, but taking the first step and having the initial conversation will put everyone’s mind at ease — including your parents'.
Your initial goal is to find out the basics, but be respectful when doing so:
- Do they have important documents prepared, and where are they?
- Do they have a financial professional?
- Do they have adequate life insurance to ensure the surviving spouse can live out their dreams even if they both don’t get to see them fulfilled?
- Do they have enough retirement income in place to pay their bills and cover the essentials and also the what ifs”, or will they need help?
- If both parents are living, is one more able than the other to do these things?
Consulting a financial professional can also help you understand what other information you should know and can help your parents evaluate their finances.
How should you start the conversation?
How you have the conversation can play a vital role in the outcome of your aging parents' financial situation. According to a 2019 survey by GOBankingRates, 73 percent of adult children have not had detailed conversations with their parents about their finances, with one of the top reasons being they don't know how to have the discussion. Most likely, your parents have been taking care of themselves for a long time and may feel hesitant or uncomfortable in having this conversation. Take it slow.
To start, you could talk about something similar that’s happened to someone they know, such as the loss of a good friend or a neighbor. This type of loss may already have your parents starting to think about their own wishes and financial situation. Maybe you yourself have started thinking about making a will and could ask your parents if they have ever had the chance to draw one up. If you feel that one parent is more receptive to having an open dialogue about finances and caregiving than the other, you can ask to have the conversation with them alone.
Consulting others such as friends or other family members can provide reassurance and relief, too. Creating a team to address these difficult situations can help take the burden off an individual. You can ask others about their experiences and any advice they may have.
You may also suggest speaking with a financial professional. Doing so can alleviate your stress of feeling like you need to know what is right for your parents. The agent will know the appropriate solutions to offer and can help the parents analyze their needs, budget, etc. The agent may also have some tips and guidance about how to speak to your parents, and they can speak with them directly, too.
Other suggestions on how to have the conversation include:
- Talk about the situation of a friend or neighbor and ask what they would want to do in a similar situation.
- If they have any health concerns, you could ask what type of care they would want should it get worse.
- You could ask them what keeps them up at night about their future.
- You can tell your parents that you’d like to help organize their finances, so they can enjoy themselves without worrying about money. You can suggest speaking with a financial professional to help with organizing their finances.
When is the "right time" to have the conversation?
It may seem like it’s never a good time, and you may consider putting it off, but why wait until something unexpected happens? Experts advise that sooner is always better than later. You can also initiate the conversation even if they seem healthy and independent, which is considered the best time to do so.
Having the conversation sooner rather than later can allow your parents more time to create a plan to deal with the unexpected events in their future. It can also help ensure that they have the essential legal documents prepared, including a will, power of attorney and advance healthcare directive as all of these documents require that a person is mentally competent to sign.
If your parents are initially not open to having the discussion, you can try again later. Talk to them regularly and try not to procrastinate the conversation. These moments may be difficult for you to go through, but the advice and guidance from a financial professional can help, too. In the end, the sooner you can have the financial burden taken off both you and your parent’s shoulders, the easier planning for both life and retirement can be.
To be prepared on how to have the difficult conversation with aging parents and loved ones, review our Checklist of Important Documents/Items.