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Aligning Wealth Management with ESG Values
EP Wealth’s Carrie Sax, CFA, CFP® shares insights on ESG investing, explaining how it adds a layer of due diligence while helping clients align...
Talking finances with your parents can be difficult for everyone. Learn how to have an honest conversation about money with your aging parents today.
How to Talk to Your Aging Parents About Finances
Members of the sandwich generation often find themselves in a tough spot—caring for their kids while also supporting aging parents.
Thanks to advances in medical science, people are living longer than ever. But that gift comes with challenges. Many retirees find themselves outliving their savings, dealing with costly medical conditions, or facing the unexpected consequences of financial missteps. On top of that, other factors, like rising healthcare costs or insufficient planning, can quickly deplete a parent’s finances.
This can lead to a difficult and emotional role reversal, where adult children step in to support their parents. For caregivers, it often feels like an impossible balancing act—prioritizing a parent’s financial needs, saving for personal retirement, or helping kids achieve their educational dreams.
That’s why it’s so important to start the conversation early. By having open and honest discussions now, you can work together to plan ahead, guiding your parents to maintain their financial independence while preserving your family’s future.
Identifying the Warning Signs
As your parents age, subtle changes in their behavior can serve as early indicators of financial distress. These might include:
- Unpaid Bills. Notices of overdue payments or accumulating late fees.
- Disorganized Finances. Difficulty keeping track of accounts or losing important financial documents.
- Unusual Spending Habits. Making impulsive or uncharacteristic purchases, giving large sums of money away, or dramatically cutting back spending.
At the same time, cognitive decline can compound financial challenges. Research indicates that approximately two out of three Americans experience some degree of cognitive impairment by an average age of 70.
This often leads to diminished financial capacity—an inability to manage money effectively or make sound financial decisions. Signs of this might include:
- Memory Problems. Forgetting recent transactions or repeatedly asking for the same financial information.
- Confusion. Mixing up financial accounts or misunderstanding basic financial concepts.
- Difficulty with Simple Tasks. Struggling to pay bills, balance a checkbook, or calculate expenses.
- Unexplained Anxiety or Avoidance. Becoming overly anxious about financial discussions or avoiding them altogether.
If you notice shifts in your parents’ attitudes or behaviors around money, it’s time to start a conversation. Even if they aren’t showing these warning signs yet, discussing finances now might potentially help avoid misunderstandings, manage future problems, and help assure their financial well-being could be preserved as they age.
Starting the Conversation About Money with Your Parents
Discussing finances with your aging parents can feel daunting. It’s a sensitive topic, and many parents may resist the conversation out of pride, fear, or a desire to protect their independence.
Before initiating the conversation, identify what you hope to achieve. This could include:
- Ensuring your parents have updated wills, powers of attorney, and healthcare directives.
- Determining how you can help, whether it’s managing bills, setting up automatic payments, or contributing financially.
- Establishing a plan for monitoring their finances or supporting them with day-to-day decisions.
Once you’ve determined your goals, approach the discussion with empathy and respect. Choose a moment when everyone is calm, and bring it up in a casual, non-confrontational way. For example:
- “I’ve been reviewing my financial plans lately, and it made me think about how we can work together as a family to prepare for the future.”
- “I know how much you’ve done for us over the years, and I want to make sure we’re ready to support you in any way you might need.”
- “This isn’t about taking over or prying; I just want to make sure we’re on the same page and can avoid any unnecessary stress down the road.”
Having this conversation in a “safe” environment may also be helpful. Try to choose a familiar and private setting where your parents feel at ease—perhaps over a family dinner or during a quiet afternoon at home. Additionally, limiting the audience to only the most trusted family members, such as siblings or a close relative, may help keep the discussion relaxed and open.
By approaching the topic with empathy, respect, and a clear sense of purpose, you can create a collaborative environment where everyone feels heard and supported.
Understanding Your Parents’ Financial Situation
Getting a clear picture of your parents’ financial situation can help prepare you for the challenges that come with aging. Many older adults face common financial pitfalls that can impact their security. These include:
- Failure to Plan for Rising Healthcare Costs. Medical expenses tend to be one of the largest expenses for retirees and often increase with age. Without proper savings or insurance, these costs can quickly deplete a retirement fund.
- Underestimating Inflation. Post-pandemic inflation, which peaked at a staggering 9.1% in June 2022—the highest rate in 40 years—has taken a significant toll on many households. Your parents may have had to dip deeper into their savings than anticipated, making it harder to maintain their financial security in the years ahead.
- Lack of Estate Planning. According to Caring’s 2024 Wills and Estate Planning Study, only 32% of Americans have a basic estate plan. Without updated wills, trusts, or powers of attorney, your parents’ assets and wishes may not be handled as they intend.
First, determine where your parents stand financially, reviewing their income sources, savings, debts, and monthly expenses. This will help you identify areas where adjustments might be needed, such as high-interest debt or excessive discretionary spending.
If changes are required, consider strategies to help them regain financial stability:
- Talking to Your Parents About Relocating or Downsizing. A smaller home or a move to a more affordable area can reduce expenses.
- Cutting Unnecessary Costs. Evaluate subscriptions, services, or luxuries that are no longer practical.
- Accessing Resources. Explore senior benefits, assistance programs, or refinancing options to alleviate financial strain.
Taking these steps can help your parents build towards a sustainable plan for their golden years while maintaining their independence and financial well-being.
6 Legal Documents Parents Need
Having the right estate planning documents in place is crucial to create a plan to ensure your parents' wishes are honored and their financial and medical decisions are managed according to their preferences.
Here’s a list of documents every aging parent should have:
- A last will and testament outlines how assets will be distributed after death and appoints guardians for minor children, if applicable.
- A living trust can help avoid probate, provides privacy, and allows for the seamless management of assets.
- A durable power of attorney designates someone to make financial decisions on their behalf if they become incapacitated.
- A healthcare proxy or medical power of attorney names a trusted individual to make medical decisions if they’re unable to do so.
- An advance healthcare directive specifies their wishes for medical treatment and end-of-life care.
- Beneficiary designations ensure retirement accounts, life insurance policies, and other assets go to the intended recipients.
Having these documents in place not only provides an intentional plan but can also minimize confusion and stress during difficult times.
Preserving Your Financial Well-Being
Helping your aging parents financially can be seen as a significant act of love and support, but it’s crucial to approach this responsibility with caution. While your instinct may be to step in and provide assistance, remember that jeopardizing your own financial security to help them may create challenges for your future—and potentially leave you needing support down the road.
Start by assessing your financial situation honestly. Determine how much you can realistically contribute without disrupting your own financial goals. If necessary, consider alternative ways to assist your parents, such as helping them create a budget, consolidating debts, or exploring government benefits and assistance programs they may qualify for.
If you have siblings, make it a priority to involve them in the conversation. Discuss how you can work together to share responsibilities—both financial and non-financial—to ensure fairness and avoid placing too much burden on one person. This might include dividing costs for caregiving, splitting time to handle errands, or pooling resources to hire professional help if needed.
By setting boundaries and working collaboratively, you can preserve your own financial well-being while working towards seeing your parents receive the support they need in a sustainable way.
Educate your parents about fraud, scams, and common mistakes
We know that financial decision-making gets harder with age. Our increasingly digital world can leave many seniors at risk of financial fraud. The availability of low-cost AI tools has led to a significant increase in the amount and sophistication of cybercrime and fraud.
Below are some concrete things that you can start to do today with your aging parents to educate and potentially help protect them, their assets, and their future. Many of the items listed are best practices for us to take to protect ourselves.
- Credit report – Get a complete credit report run from one or all of the major credit reporting agencies (Equifax, Experian, and TransUnion) to get a full understanding of your loved one’s current credit situation and understand which accounts they have open in their name.
- Freeze their credit – After understanding what accounts are open, freeze your family member’s credit in order to prevent them from accidentally opening an account or to prevent others from opening one on their behalf.
- Monitor their credit – Monitoring a loved one’s credit for free through Credit Karma or another service can help you understand if there are any changes that need to be addressed.
- Autopay for monthly bills – In order to relieve your parents from the stress of having to write checks or keep track of their monthly bills, encourage them to set up auto payments. This can help ensure that important bills (auto insurance, mortgages, utilities) are paid no matter how involved you are in their day-to-day lives
- Set up a password manager for your parents –This can ensure that they are using unique and strong passwords for each of their online accounts and only need to remember one password. With their permission, this can allow you to monitor their accounts as well to help identify whether something seems amiss.
The Benefits of a Financial Advisor
Helping aging parents manage their finances while staying on top of your own can feel overwhelming, especially for members of the sandwich generation balancing multiple responsibilities. That’s where a financial advisor can make all the difference.
With tailored advice, clear strategies, and an objective perspective, a trusted advisor can help you craft a plan that addresses your unique circumstances, striving for the financial well-being of both you and your parents. They can also facilitate challenging conversations in a supportive and neutral way, helping to navigate sensitive topics with care and understanding.
At EP Wealth, we recognize the complexity of this situation and have helped countless clients find balance in caring for their loved ones while securing their own financial future. Our experienced team can assist with creating a sustainable budget, managing healthcare costs, planning for long-term care, and navigating estate planning, tax strategies, and government benefits to possibly ease the financial burden.
You don’t have to face this alone. Let us help you create a comprehensive plan intended to provide clarity, confidence, and financial peace of mind.
Disclosures:
- EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
- Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
- Hiring a qualified advisor and/or financial planner does not guarantee investment success, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.
- The need for a financial advisor, estate planner, or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC will satisfy your specific financial services requirements. Services offered by other advisors may align more to your specific needs.
- All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be suitable or profitable for a client’s portfolio. The risk of loss can never be eliminated even if working with a professional.
- An estate plan is a helpful tool that can assist individuals in managing and arranging affairs in the event of death or incapacity. However, the scope and extent of the plan varies depending on the unique circumstances and desires of the individual client. It is for this reason, that the analysis encompassed herein is not intended to be comprehensive in nature nor should it be interpreted as legal advice. Please consult a legal professional to determine the extent, scope, and the drafting and creation of the appropriate estate documents. EP Wealth Advisors is not in the business of providing legal advice or preparing legal documents. Our review is limited to and in association with Financial Planning only.
- Please consult with a CPA, tax professional, and/or attorney regarding your specific situation before implementing any of the strategies referenced directly or indirectly herein.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
