Many parents like mine need a handholding and care. I noticed this when last week I visited a “sarkari bank” with my parents to renew Life Certificate (for pension). I met many elderly couples and singles who are struggling with issues like depleted PAN card or inability to write a simple application or fill the internet banking application form. Managing parents finances is not everyone’s cup of tea or every parent is blessed with such help.
Parents feel assured when they share their finances with someone. Also when age increases they actually may require your help. Managing parents finances is also challenging similar to what you face when you manage yours. There are a few more considerations and we shall learn them today.
Managing parents finances is a challenge. You need to devote a lot of time for it. This may happen if they are is a messy situation or when parents are not aware how they should invest and manage their finances.
This involves dealing with internal issues like inflation, taxation, monthly requirements, health care or paying leftover loans. You also deal with the external world like banks, MFs, pension funds or mediclaim companies.
Being children you need to see how they can be stress-free, follow law of land, make investments as per need and make proper redistribution strategy.
The Starting Point in Managing Parents Finances? Noticing Red Flags
You may note certain signs when you need to step up. Unpaid bills and late payment notices, or bills paid more than once are few as starting. You may see piles of unopened mail. Unusual calls from banks to subscribe cards or insurance. You may see parents discussing options which they never considered like having a credit card or investing in neighbors business. A new willingness to take more investment risk or invest in getting rich – quick schemes.
You may also get mail and phone solicitations that suggest your parents may have already been duped by non-required products or some frauds. A new “Friend or Advisor” who appears to have financial influence over your parents and is busy completing his targets. They continually ask the same question even though it has been answered multiple times. They want to assure that they have your nod in this messy situation.
How to talk elderly parents about finance?
In situations like above, it is very important to tell them or involve yourself. Any delay means a more slippage of money. It becomes difficult to talk as you will always be a little kid in their eyes. I have seen many parents, in fact, acting fund managers when his son or daughter starts working. In fact, many life insurance policies or PPF accounts are courtesy parents only.
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So how do you talk to people who have handled your finances once, who are elder in relationship and experience? Sometimes when you are not the single child it becomes more difficult as your siblings may get wrong signals.
The best way is to talk with a solution in hand. Just making them realizing where they are wrong or lacking is not a good idea. Present with a solution to make “better the best”. The plan depends on the current situation and extent of help that would bring the good situation back.
Strategy during normal time
When the situation is under control and it just needs streamlining, you can just work with this aging parents checklist.
Aging parents checklist
Locate & Organize Key Documents
Will, health care cards, insurance documents, retirement saving accounts detail, bank accounts, investment accounts, locker details and key, deeds to property, KYC related documents – All these documents need to be in proper form with copies in soft and hard. In case name or address, differs from original, apply to put them straight. A simple excel can help you put them in order.
Set up Automatic Payments
If your parents are in another city or living separate, paying bills is a very big task. Daily technology is changing and its difficult for them to adapt. Help them automate whatever you can using the bill payment features of banks. All online access have bill payment and you can pay bills related to utilities, cable, internet, medicines etc. Also automate payments for investments, premiums or contribution to society maintenance etc.
This may look invasive but if your parents are prone to get carried away with sales pitches of bank RMs or an old colleague who is an insurance agent etc. keep a distance look at the transactions. Look for any unusual activity. Review-online or on paper -parent’s bank, credit card, and investment accounts.
Are the nominations/beneficiary updated?
This is very important for the survivors too. Nominations ensure proper usage of the fund with minimum paperwork after death. Will can help them plan entire redistribution of the estate. I will cover nomination and Will some other time in detail but you should ensure that you speak to your parents about it.
Talking about after death situation is not very common in our country whereas in west people plan their funeral expenses with their advisor’s help. So nothing wrong in streamlining the affairs for the family.
Meet people working with your parents to managing their money
Have your parents introduced you to their banker, accountant, lawyer or other financial professionals? It is very much required to develop confidence and find gaps for future. In case you find anything bothering address it right away.
Strategy During Special Situations
Many time situation may demand your complete attention. A recent case:
One of my friend’s father was investing in Post Office Recurring Deposit. For years the agent who was known and belong to same cast (exploiting the familiarity), visited them every month to collect the monthly installment. The agent kept all records saying that every month he has to present the passbook to deposit the amount. They trusted him. One day newspaper reported that the agent has been arrested due to fraud. He was not depositing any money at post office. He was syphoning the money and issuing fake passbooks to hundreds of investors. They lost 10% of networth. So they were devastated. But besides money, the trust was breached. Friend’s father had a nervous breakdown.
Similarly, there can be situations similar or medical emergencies, mis-selling or any accident with financial loss etc when you need to intervene and resort to professional help. Do not wait as time may be a crucial factor.
Hire a Professional to handle the money
If there are any unforeseen event or when managing parents finances gets too onerous, hire a professional advisor or make sure your parents meet with your financial planner/advisor.
I will share my professional learning which has come by observations. I work closely with some families who do not worry about money because they have channelized it rightly. And when you don’t have financial worries the atmosphere changes in the family. Positivism prevails.
Hope this post will help you extend the arm which your parents may have been waiting. You also now have directions which issue to address first.
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