5 Ways To Help Your Parents With Their Finances

by Reelika Tiik
Ways to Help Parents with Finances photo

Taking care of your parents’ finances doesn’t have to be stressful or overwhelming. The key is to act in the best interest of your parents. These steps can help make things easier for both your parents and for you.

Caring for an elderly parent can be physically, emotionally, and mentally challenging. Becoming a caregiver to a parent is a role reversal, even if you’re just attending to his or her health. It can be overwhelming if you have to take over your parent’s finances, too. These five steps can make it easier for you to help your parents manage their money.

1. Open the lines of communication.

The most important and often overlooked aspect of helping a parent with money is being able to communicate with them. Unless their mental capacities have lapsed, discuss everything related to their finances with your parents before you make any decisions or changes.

It’s their money, after all, so include them in decisions regarding what to do with it. Make sure they understand that you want to help them rather than take away their independence, and them keep them informed by telling them what you are doing with the monies as you are doing it.

Also, communicate with other family members. Even if one sibling is the primary healthcare provider while another is handling the finances, all siblings need to stay in the loop, especially those who are not local or involved in the day-to-day management of your parents’ lives.

Sit down with all interested parties to determine the following:

  • What level of care needs to be provided, and how much your parents can afford.
  • Who will provide the care, and where. If you bring in an outside caregiver, select one family member to be the point person for the caregiver.
  • Where the money for the care will come from, and who will control it. Again, you need one person to pay your parents’ day-to-day bills and manage their assets.

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2. Establish a durable power of attorney.

A durable power of attorney allows you or another trusted person to act on your parent’s behalf. This simple legal document allows this “advocate” to make financial decisions for your parents if they cannot do so on their own.

Those suffering from dementia or senility who are no longer competent to make their own decisions still have finances to manage. Having power of attorney over your parents allows you to write their checks, pay their bills, change their investments, and attend to other financial matters. This legal document needs to be created before a parent becomes incapacitated.

Need to Set Up a Power of Attorney?

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3. Opt for safe investments.

When handling an elderly parent’s finances, the first word is safety. A 70- and 80-year-old should not have half her net worth in one stock, even if she’s owned it for 50 years and feels obligated to keep it. The last thing you want is for this one stock to go south, and suddenly you don’t have the money to pay for your parents’ care. Loyalty is not returned in the financial markets.

Keep your parent’s portfolio conservative. Its majority should comprise Treasury bills, notes and bonds, bank CDs, and money market accounts. Accessibility and safety are paramount during this stage of life.

4. Put a will, a living will, and a healthcare proxy in place.

Ensuring your parent has these three legal documents can avoid giant hassles later. Each has a very specific purpose.

  • Will: A legal document that allows an individual to state who should inherit his or her property.
  • Living will: A legal document that makes a person’s healthcare wishes known if she or he becomes incapacitated. The living will usually focus on life-prolonging medical treatments.
  • Healthcare Proxy: A document that appoints an advocate to make healthcare decisions for a person that are not detailed in a living will if he or she is incapable of doing so.

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5. Execute your plan.

Coordinating a plan of this magnitude is not easy; many things that are worthwhile aren’t. But once it is coordinated, you need to make it happen. It is not uncommon to put together a fantastic plan only to delay its execution. This procrastination often leads to regret down the road.

Set a date for when you plan to accomplish each task and stick to your deadlines. This will give you the motivation you need to work your plan.

Taking care of your parents’ finances doesn’t have to be stressful or overwhelming. Decide which of these steps works best for you and your parents. The key is to act in your parents’ best interest when managing their finances.

Reviewed November 2023

About the Author

Reelika Tiik works as an Internal Controller. She is also an online entrepreneur who provides inspiration, tools and resources to women to start their own business, and better manage their finances without sacrificing the needs and dreams of their families..

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