When we’re young, our parents teach us smart money habits and how to manage our finances. But our parents face their own new financial challenges as they age. For example, they may struggle with deciphering bills and account statements, keeping up with tax law changes, and more. Plus, they are one of the most vulnerable populations to scams.
Fortunately, you can return the favor by helping them with their finances. The challenge is to do so in a way that feels like you genuinely want to help them without threatening their sense of independence. T his article will dive into five ways you can help your aging parents with their finances.
1. Assist them with organizing documents
Gathering and organizing documents are fundamental ways to create and maintain a solid financial plan — especially when it comes to estate planning. First, you can help your parents make a list of all their assets, debts, income sources, and other aspects of their financial situation. Then, you can look for all documents related to these systematically. Finally, you can assist your parents in storing these documents in an organized and safe location, like a safe or lockbox.
2. Help them choose a life insurance policy
Life insurance can allow your parents to cover each other if one of them passes away, thanks to the substantial death benefit payout. It can also help them fulfill their estate planning wishes by passing more of their wealth to their beneficiaries. Compare and contrast some of the best life insurance for seniors with your parents:
Term life insurance
Term life insurance is a temporary policy that covers you for a fixed time period of 10 to 30 years, depending on your preferences and needs. The longer the policy term, the higher the premiums — but premiums for term life insurance are affordable overall. However, you’ll need to get a new policy or renew your policy when it expires to continue coverage.
Whole life insurance
Whole life insurance can be more costly than term life insurance, but coverage lasts for life. It also comes with a cash value growth component — part of each premium you pay goes toward this component, which grows tax-deferred at a fixed interest rate.
Policyholders can borrow against or withdraw from cash value when it grows large enough. You receive the full cash value minus surrender charges if you surrender the policy.
Universal life insurance
Universal life insurance also lasts for life and provides a cash value growth component that grows based on current interest rates. This type of policy also offers flexible premiums and death benefits.
You can reduce your premiums at any time, which also reduces your death benefit. You can also request a death benefit increase in exchange for higher premiums. If the request is large enough, you may have to take a new medical exam. You can also use your cash value to pay universal life insurance premiums once it grows large enough.
Final expense insurance
Final expense insurance is a small permanent life policy that covers medical bills, funeral costs, and other end-of-life expenses. This policy type has a small death benefit but inexpensive premiums. Final expense policies also come with cash value.
3. Discuss healthcare costs
Healthcare is one of the most pressing financial issues for seniors. People become eligible for Medicare at 65, but Medicare may not cover everything — especially if one of your parents develops a medical condition. Therefore, you may want to discuss medical expenses with your parents to help them be prepared for higher health costs.
4. Ask about estate planning
Estate planning can be a tough subject to broach, but the consequence of no estate plan can be worse. Without an estate plan, courts may distribute assets. This process can cost time, money, and heartache through potential infighting among family members.
Being patient and empathizing with your parents is important since financial and end-of-life topics can be sensitive. Avoid opening the conversation out of nowhere — instead, bring it up naturally in conversation about something related. Make the conversation about what they want and their best wishes, and try to involve the whole family.
5. Make them aware of scams
Seniors can be a vulnerable population to online financial scams. This is because seniors tend to have substantial assets yet are only sometimes familiar with the latest technology trends. In 2020, the FBI’s Internet Crime Complaint Center reported that losses related to financial scams exceeded $4.1 billion. About 25% of these losses happened to seniors over the age of 60.
Therefore, discussing what kind of scams to watch out for and what safety precautions to take to stay safe is vital. For example, you should make sure your parents know never to give out their Social Security numbers or other personal details via unsolicited phone calls and emails.
Work together with your parents on their finances
Now that your parents are aging, it’s your turn to assist them with their finances. Start by helping your parents gather documents and discuss life insurance. Talk about healthcare and estate planning as well, and approach the latter conversation carefully.
Finally, let your parents know about common scams that may target them and offer some cyber safety tips so they can stay and feel secure in their finances. Taking these steps can make the process painless and even more enjoyable while creating financial peace of mind for everyone involved.