Don't Make These Mistakes When Managing Elderly Parents’ Money

As your parents age, they might need help managing money matters. A health issue or cognitive decline could force you to get involved to protect their financial well-being.

However, managing someone else’s money can be overwhelming, and many caregivers make mistakes that can have long-term consequences. Make sure you avoid these common missteps if you are a financial caregiver for a parent.

Postponing important conversations

You should be having conversations with your parents about their finances and before there is a need for care. This will help ensure that you have the information you need and are prepared to step in if you have to start managing their finances.  

Ask if they have a will and other estate planning documents and where they are located. Find out what sources of income they have, how bills are paid and what types of insurance policies they have. Let them know that you’re asking for this information to be prepared in case of an emergency. If they are reluctant to talk, encourage them to write down this information and to tell you when and how you can access it.

Tip: Approach the topic from a place of love and respect for your parents. Understand your parents’ wishes and make sure you’re both on the same page about what role you will take in managing their finances.

[ See: A Checklist for Talking to Your Parents About Their Finances ]

Waiting too long to get involved

As your parents age, they may struggle with managing their money as a result of physical health issues or cognitive decline. However, they likely won’t reach out to you because they might not recognize that they’re having problems or might be too embarrassed to ask for help.That’s why you should be on the lookout for early warning signs that your parents need help with their finances, such as piles of unpaid bills. Otherwise, little mistakes they are making could quickly become big financial problems.

Tip: Don’t force your way in if your parents’ need help. Start by offering to assist with tasks they need the most support with, such as setting up automatic bill payments to ensure bills are paid.

Assuming finances are in order

If you don’t already have details about your parents’ finances and they need help, don’t assume that they’ll have everything neatly organized in a spreadsheet or even a notebook. You should ask what they are willing and able to share with you. However, you might have to play detective to get the information you need.  

Tip: Offering to help your parents go through their mail to sort the junk from bills can be a good way to start piecing together their financial picture. Other good sources of information about their finances include their checkbook, tax returns and credit report, which can be downloaded for free from Annualcreditreport.com. 

Being legally unprepared to help

Many caregivers make the mistake of not asking parents whether they have a power of attorney document that names someone to make financial transactions for them if they can’t. Without the proper legal documentation, you may find it difficult or impossible to assist your parents with their finances when the time comes.

Tip: Encourage your parents to meet with an elder law or estate planning attorney to set up power of attorney, healthcare proxies, and other legal documents to ensure you have the authority to help manage their finances and medical care when necessary.

Not setting up automatic payments

If your parents are having trouble remembering to pay their bills, setting up automatic payments can ensure that their utilities, mortgage or rent, insurance premiums and other recurring expenses are paid on time. It also can save you time so that you can focus on providing them with other support they might need.

Tip: As you set up payments, have your parents’ statements emailed or mailed to you. If they continue to receive bills, they might get confused and send in checks in addition to automated payments. 

Not monitoring accounts regularly

Even with automatic payments in place, you should monitor your parents' financial accounts regularly. Unexplained withdrawals, bank errors or fraudulent activity can go unnoticed without frequent checks. You should be logging onto their accounts—with their permission or as their power of attorney—and signing up to receive transaction alerts.

Tip: A service such as Carefull makes it easy to keep tabs on your parents’ finances. It provides 24/7 account, credit and identity monitoring and alerts you to unusual transactions and money mistakes.

Assuming parents can protect themselves from fraud

Adults 60 and older lost an estimated $60 billion to fraud and scams last year, according to the Federal Trade Commission. As cognitive function declines, older adults become even more susceptible to fraudulent schemes, such as phishing, identity theft, romance scams or even exploitation by people they know. It’s important to put protections in place for your parents and be alert to signs of exploitation. 

Tip: Educate your parents about common scams and scam tactics, and set up safeguards such as fraud alerts, credit monitoring and identity theft protection—all of which are provided through a service such as Carefull. 

Not seeking help from financial professionals

Managing your parents' finances can be more complicated than you realize. It’s easy to make costly mistakes if you’re not familiar with how programs such as Social Security and Medicare work, don’t understand the ins and outs of paying for long-term care, or don’t have a firm grasp of tax and estate planning issues. Getting help from professionals can ensure that you’re handling your loved ones’ finances properly. 

Tip: Consider working with a financial advisor, certified public accountant or elder law attorney to help manage your parents’ finances. They can provide valuable advice on tax planning and protecting assets.

Jeopardizing your own finances

Finally, one of the most common mistakes caregivers make is sacrificing their own financial security while trying to help their parents. AARP estimates that family caregivers spend, on average, a quarter of their income on caregiving activities. Plus, they often dip into their savings, take on debt and have to work fewer hours at their paying jobs. 

Tip: Soften the financial blow of caregiving by asking other family members to pitch in with caregiving responsibilities or to provide financial assistance. And look into government programs that can help cover the cost of care for your parents, such as Medicaid and the VA’s Aid and Attendance program.

‍[ Keep Reading: How Family Caregivers Can Protect Their Own Finances

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