Your parents might be approaching the age when you need to have “the talk” with them.
Award-winning personal finance journalist Cameron Huddleston shares some tips on the latest episode of Common Cents on the Prairie that will help you have that “talk” with your parents…about money, of course.
You can read a recap of Cameron’s tips below, watch the full episode on YouTube, or listen on your favorite podcast app!
Adam: You wrote this fantastic book about an area of personal finance that doesn’t get talked about nearly enough: talking to our parents about their money. Walk us through your background and what inspired you to write the book Mom and Dad, We Need to Talk.
Cameron: What really prompted me to write the book was my own experience with both my mother and my father. My father died at the age of 61 without a will — and the kicker is that he was an attorney, so he should have known better.
A few years later, when my mom turned 65, she was diagnosed with Alzheimer’s disease. I hadn’t had detailed conversations with her about her finances. I had to scramble and play detective, and I realized that a lot of people were probably in the same boat that I was.
People were waiting until that emergency to have these conversations that they should have been having while their parents were still relatively young and healthy. That’s what prompted me to write my book: to help people realize they need to have these conversations sooner rather than later, and to guide them through having them.
Adam: I think a lot of people assume that talking to their parents about money is really only something wealthy people do. I’m guessing you would agree with me that it’s actually the opposite; it’s more important for children of parents who haven’t saved a ton for retirement or are at risk of outliving their money to have these conversations because they may be called upon to act or help bridge the gap.
Cameron: You are exactly right. If your parents are not wealthy or don’t have their financial act together, it’s even more important for you to have these conversations because your parents are more likely going to need support from you as they age.
You need to know as soon as possible what sort of expectations your parents have for you. Now, your parents are probably going to say, “Oh, I don’t want to be a burden on you. I don’t expect you to help me out.” But most of us are not going to leave our parents out to dry.
And you need to have these conversations to find out: where do you stand financially? What sort of care do you want? Are you expecting me to provide that care for you?
The sooner you can find these things out, the sooner you can start making adjustments to your own finances to be prepared for the possibility that you might have to provide support for your parents. Don’t let your fears of having these conversations prevent you from talking to your parents because, as awkward as these conversations might seem, the consequences of not having them are so much worse.
Adam: Because we don’t want to have this conversation, it can be easy to put off. But you say that’s one of the worst things we could do. Why is that?
Cameron: Often, it’s not until an emergency that we realize we need information about our parents’ finances. And the bigger issue is that we might not have the legal right to take action with our parents’ finances or to make medical decisions for them.
Every adult needs to name a financial power of attorney to make financial decisions for them if they can’t. Every adult needs to have a health care power of attorney who can make medical decisions for them. Every adult needs a living will that spells out what sort of end-of-life medical treatment you do or do not want.
You need to find out if your parents have these documents, who they’ve named as their power of attorney, and who they’ve named as their health care proxy. If these documents have not been drafted and signed while your parents are still mentally competent, then you’re going to have to go to court to petition to become your parents’ conservator or guardian.
This is an absolutely terrible process most of the time. It can cost thousands and thousands of dollars. You’re essentially putting your parent on trial to prove that they are no longer competent. Then, if you are named conservator, you have to file an annual report with the court detailing how you manage your parents’ finances.
If you have already been named power of attorney, that’s it. You’re good to go. When that emergency crops up, everything is already in place. You’re not scrambling. You’re not playing detective to figure out what sort of assets and accounts your parents have.
Adam: Do you have any tried and tested ideas of how to start this conversation?
Cameron: I actually have ten different conversation starters in my book. If you are young and just starting out, a really easy way to start these conversations that helps you avoid role reversal is to ask your parents for advice about your finances.
Go to Mom or Dad, and say, “Hey, I just started a new job. Should I be participating in the workplace retirement plan? I just got married; does that mean I need a will?” Your parents’ responses are going to give you clues about what sort of planning they’ve done.
If you are in mid-life, you likely have a story — someone you know who’s already been involved with their parents’ finances in one way or another. You can use those stories either as cautionary tales or examples of someone who did it right.
If your parents are reluctant, tell them, “You don’t need to tell me this information. Just make a list of your accounts. Make a list of your usernames and passwords. Make a list of all your insurance policies. Make a list of any debts that you owe. What assets do you have? What sort of investments do you have? Tell me where I can find this list and under what circumstances I can access it.”
Then, you know the information is there when you need it, but it lets your parents retain control.
If you’d like more guidance on how to have “the talk” with your parents, send us a note. We’d love to have a conversation with you!
Any comments, insights, or strategies discussed in this article are intended to be general in nature and, therefore, may not be suitable for you and your situation, whatever that may be. Before acting on anything written here, please consult with your attorney, CPA, and/or your financial advisor.