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Talking to Your Parents About Money? Here Are Things to Make It Easier

How comfortable are you talking to your parents about money? The reality is that for most of us, discussing our financial situations with family is one of the last things we want to do.

But it’s an obstacle we all need to get around-and the sooner the better. For younger and mid-career workers, it’s time to have a heart-to-heart talk with your older family members about the future.

Family finances may be more complicated today due to the fact that two generations of Americans are living longer into retirement. Due to demographic factors and growing lifespans, significant numbers of the Baby Boomer generation, who started turning 65 in 2011, are living in dual retirement alongside their own parents.

That unusual dynamic of an aging population will create a new set of challenges for families. As many older family members may deal with chronic and acute health conditions related to aging, it will put a strain on their finances, lifestyles and time-and on those of their adult children and grandchildren.

Which means that younger workers in the Generation X and Millennial cohorts will be called on to tend to the needs of their aging parents and grandparents-at the same time they are focusing on raising their own children and building their own wealth toward retirement. That’s a delicate balancing act.

Don’t avoid or postpone discussions of the future with aging family members. It’s better to have those conversations now and make sure everyone is on the same page when it comes to finances, health care and other issues.

So what do you need to know about dealing with aging family members? Every family dynamic is different, but here are a few helpful starting points.

Time to be honest about finances and health.

Why is it so hard to talk to your parents about their finances? There may be a variety of reasons, depending on individual personalities and family dynamics. Many people, understandably enough, don’t relish having to think about or talk about their mortality, and your parents and grandparents are probably no different.

But it’s a critical conversation to have to ensure that you know your parents’ intentions and that all parties have a clear understanding of their expectations and responsibilities.

If your family has never been particularly open about finances, be sensitive in approaching the discussion. You might need to broach the subject slowly, over time, to allow your older relatives to grow more comfortable about talking. It may take time for trust to develop.

Fidelity has a useful tip sheet of “Six tips for talking about money with your parents.” One particularly good tactic: asking your parents or grandparents for advice on a financial issue of your own can be a good way to break the ice surrounding financial issues and get the discussion started.

From there, you can open the door to discuss other key financial issues that affect the family. Consider questions like:

  • Are they prepared for the expenses of a lengthy retirement?
  • What are their expectations or plans in the event of a health emergency, or if they should require long-term care?
  • Do they have an estate plan in place for the orderly transfer of assets to beneficiaries?
  • Where are relevant financial records and other key items found?
  • If your parents work with financial professional, who is that person and how do you reach them?
  • What can you do to help them be better prepared?

You may not address all these questions at once-it might be more constructive to view this as a series of discussions that take place as everyone grows more comfortable sharing and talking about the future.

Be clear about setting expectations and making arrangements.

Clarity is key. If your parents plan on transferring assets to heirs, how will that take place? If you’re going to provide help to your parents in their retirement, either in the form of financial support or time, how will that be structured?

Ask your loved ones to authorize a “contact-only” trusted individual for advisors to reach out to should the advisor notice signs of diminished capacity or financial exploitation. The trusted individual should not be someone who is allowed to make decisions on the account owner’s behalf, or have any authority over, or connection to, the account.

This is a good time to keep careful records of your discussions with your parents and grandparents, so that you’re clear on their wishes and preferences. If you have siblings or other family members who are involved, it may be helpful to identify one person to serve as the “point of contact” for family financial issues.

Be on the lookout for signs of elder abuse and exploitation

It’s an unfortunate fact of modern life that seniors are ripe targets for fraud, abuse and exploitation. Unscrupulous scammers have grown adept at targeting people at an especially vulnerable time of life.

It’s estimated that seniors collectively lose more than $2.6 billion per year to financial fraud and abuse. That figure probably understates the true total, since most incidents go unreported, often as a result of embarrassment, isolation, disability or mental infirmity.

You might think the most serious threats come from strangers. But many seniors-more than one-third, according to a 2011 study of financial fraud by MetLife-are victimized by caregivers and family members. That’s likely another reason so many incidents of exploitation and abuse go unreported, as the victim may hesitate to subject a loved one or trusted friend to legal consequences.

As above, communication is the key. If you’ve already taken the step to talk about family financial issues with your parents or elder relatives, you’ll likely be better positioned to spot signs of fraud or financial exploitation before they happen.

Remember: prevention is the best medicine. Knowing about common frauds and scams and signs of abuse and exploitation could help you and other family members recognize warning signs before it blossoms into a crisis. Be on the lookout for common warning signs of abuse.

Schedule regular check-ins to address changes or new developments.

Once you’ve had the discussion with your senior relatives, you might be tempted to think you’re done-but you need to keep in contact on key issues to ensure you’re on top of things.

Some people will schedule an annual or semiannual check-in discussion to address any changes or new developments. Fortunately, since you’ve already opened the door with the initial discussion, you’ll likely find that subsequent sessions are easier to initiate.

Once you’ve built the foundation of clear communication and shared purpose, keeping everyone on the same page should be a matter of ongoing maintenance.

Talk to a financial professional or other trusted third party.

In some circumstances, it may be helpful to enlist the assistance of a financial professional, accountant or attorney to help keep the discussion on track. If there’s a potential for family friction or disagreement, a disinterested third-party can offer constructive advice and even mediate disputes between family members.

Paying a professional fee may be a small price to pay to reduce the chance of misunderstandings or animosity between family members.

And there’s one more thing:

Enjoy the time together.

OK, this one isn’t really a financial issue, but it can’t be emphasized enough-now you have a chance to connect with parents, older family members and siblings in a deeply rewarding new way. You won’t regret taking advantage of that opportunity to deepen your connection with loved ones.

These tips go both ways: Parents who are looking for ways to talk to their children and grandchildren about money could employ these same tactics to smooth the way. It doesn’t matter who initiates the discussion-the important thing is that it takes place.

Let’s be honest: for many families, talking about aging and finances won’t be an easy conversation-but you’ll be glad you addressed these issues earlier, before a health emergency or crisis develops. These are all things that you can do to reduce stress and address problems before they can arise.

Helpful resources:

Senior Investor Protection Resource Center

How to talk with aging parents about money, an article from Kiplinger’s offering solid advice on how to start the conversation

Five signs your parents needs help with financial decisions, useful tips from National Endowment for Financial Education in the Wall Street Journal

Families and Money, a special report from Fidelity Investments focusing on family estate planning and other issues

Elder financial abuse: A growing concern, a primer from Wells Fargo Advisors that includes helpful tips on warning signs of financial exploitation.

Money talks….why don’t we?, article from Vanguard with tactical tips for opening the family conversation about money

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