How to Talk to Your Parents About Money
As families come together for the holidays, the last thing anyone may be thinking is, “Gee, I should talk to my folks about their financial situation!” But with busy lives, these gatherings may be a good time to at least broach the topic and to schedule a future date to conduct the dreaded, but necessary “Money Talk”. I hear your groans and you are not alone in your struggle to have these difficult financial conversations. According to a recent survey by Fidelity Investments, while three-quarters of adult children and their parents agreed that it is important to have frank conversations about money, nearly two-thirds disagree about the right timing for these conversations to occur. Parents would prefer to wait until after retirement, while their adult children want these conversations to happen well before their parents retire or experience health issues.
These timing issues seem to mask the larger problem: the “Money Talk” often invokes feelings of control (or lack thereof), privacy and dignity for the older generation. And for the adult child, it is hard to balance being responsible, while not seeming like you are prying. (For those who tell me their parents are “fine”, even if your loved ones appear to be financially self-sufficient, neurologists say that cognitive ability starts sliding as early as 60 and regulators warn that older Americans are the biggest targets of financial scams!)
All of these factors mean that it makes sense to have the money conversation when it is timely. For example, year-end is often a period when we look back and review how we have done financially. This could be an opportunity for you to ask your parents about their CD rates or portfolio performance. You may want to offer reviewing their situation with an impartial financial professional, like a Certified Financial Planner, or a CPA.
Early conversations do not have to be a forensic accounting of every last nickel of your parents' finances, but you need to explain that an open dialogue will help them feel more in control and allow you to be prepared, in case of an emergency. Once that conversation gets rolling, you can move into other important areas, like cash flow and bill paying, retirement income and the big elephant in the room, estate planning.
The good news is that Fidelity’s survey found that 93 percent of parents who have had discussions with their children about estate planning say it brought them greater peace of mind and 73 percent said it would help their children’s emotional state of mind when the time came. How can you start? Experts suggest that you frame the issue in a way that talks about your worries, rather than indicting your parents for being disorganized messes. “I just want to make sure that I carry out your wishes.”
During this conversation, you are trying to discover whether your parents have created or updated their wills, powers of attorney and health care proxies. If not, encourage them to schedule an appointment with an estate attorney. You can offer to attend the meeting, but only if they want you there. Emphasize that this is an opportunity for them to make their own decisions and to make their wishes known. One important note: Your parents may choose to do something that you don't like. Unless it is dangerous to their well-being, try not to argue for a different outcome. Keep notes of these conversations, especially if you have siblings. There are far too many stories about relatives who become estranged as a result of end of life financial decisions.
Finally, you can only do what you can do. If your parents simply shut down or refuse to talk to you about their money, don’t fight it. They may not want to talk today, but at least they know that the door is open.