With fixed incomes and rising expenses, many older adults’ finances can end up strained. LendingTree shares 5 ways to help when aging parents are in financial trouble.
You may have been financially dependent on your parents when you were younger, but as your parents get older, you may need to step in to help them manage their own finances.
Fixed incomes, unexpected medical bills, rising costs, and even scammers can land an older adult’s finances in the red.
The good news is, there are ways you can assist your parents without compromising your own financial goals.
Once you understand the full picture of their financial situation, you can begin to work together on a plan to get them back on solid ground.
Step 1: Get organized
Thomas C. West, CLU, ChFC, AIF, senior partner of Lifecare Affordability Plan, a financial management solution designed for older people, says the first step is to get an understanding of what your parents’ balance sheets look like.
You’ll want to know what assets they have in addition to their liabilities and get a sense of what their cash flow looks like.
“The adult child can really only do justice to the circumstance if they understand the whole picture,” says West, adding that “It isn’t uncommon for adult parents to downplay any financial challenges that they might have. I would counsel adult children to work sensitively and diligently to get as much well-rounded information as possible.”
It may help to let your parents know that they aren’t alone in their struggle.
Baby boomers hold an average of $28,672 in non-mortgage debt, according to a recent study, which is slightly more than what the average millennial owes.
Step 2: Prioritize and plan
The next step is to decide what you’re able to provide, whether that’s money or time.
If you have siblings, each person in your family may be able to provide something different.
For example, you might offer to help with snow removal so your parents don’t need to hire someone, while your brother may take over the cable bill.
But when considering financial help, West says, be self-aware about your own circumstances to avoid getting into trouble.
For example, you might encounter difficult choices along the way, such as whether to assist your parents with their debt or save for your own child’s education.
West says when you’re faced with an overwhelming decision, you should try to talk through what would happen if you failed to pay each expense in order to determine your top priority.
Are there any expenses that may result in an unacceptable consequence if they don’t get addressed?
For example, if someone is about to be discharged from a nursing home, paying for their care might rise to a greater level of urgency than paying off your mortgage early.
If you do decide to contribute financially, be wary of how entangled your finances can become.
Avoid co-signing a loan or adding your parents as authorized users to your credit cards, or you could become responsible for paying off their debt later on.
Step 3: Solicit outside resources
If it makes sense, consider helping your parents find the tools and services they need to make better financial decisions on their own.
That can help save both you and them financial and emotional stress.
The right resources for your parents will depend on what they need the most help with.
If getting out of debt is a priority, consider directing them to the National Foundation for Credit Counseling, a nonprofit organization that helps people with debt management plans.
Or, if you feel that your parents need financial literacy help to fully understand their situation, you might direct them to the online resources provided by the Consumer Financial Protection Bureau.
While those programs won’t help with debt directly, they can help with covering medical expenses and food, respectively.
If one of your parents is a qualifying veteran, the VA Aid and Attendance program may also be able to help reduce expenses.
You might also look into local resources that could help with other expenses, such as reduced-cost transportation programs for older adults.
Step 4: Protect your parents from fraud
West recommends reviewing your parents’ credit reports to ensure they haven’t been exposed to scammers already.
Once you’ve reviewed the reports for errors, consider putting a freeze on the credit reports. A credit freeze, also known as a security freeze, is the best way to help prevent new accounts from being opened in their name.
With a credit freeze in place, only your parents can release the reports for inquiries when needed.
You should also educate your parents about the warning signs of scams.
Remind them not to click through any links in emails or texts received from an unknown sender and to keep their sensitive financial information private.
If you believe your parent may have already been the victim of fraud, report the incident to the Federal Trade Commission.
If you don’t trust your parent’s cognitive ability to recognize scams, it’s time to consider taking over their financial decisions.
Step 5: Pursue durable power of attorney if necessary
A “durable” power of attorney is a legally binding document that your parent would sign to give you permission to make financial or health-related decisions on their behalf if they become incapacitated.
“You need to protect somebody’s independence until they move to a point where perhaps they are not making decisions that are in their own best interest,” West says.
However, you should have the document drafted before the issue becomes urgent so that your parent is capable of signing it.
You also shouldn’t be the only one making the decision.
“Make sure you’ve got an objective third-party available to help make an evaluation of the suitability of pursuing a power of attorney,” West says.
After that, hire an experienced local attorney to write up the documents.
Recommended for you:
- How to Help Aging Parents with Finances: Getting Started Guide
- Financial Help for Seniors: 2,500+ Federal, State, & Private Benefits Programs
- The Ultimate Guide to Senior Veterans Benefits
Guest contributor: Joshira Maduro works as a market research analyst for LendingTree, where she writes insightful pieces that empower people to make better financial decisions. She lives in Charlotte, NC, navigating care for her elderly parents.
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