You probably know that it's dangerous to be ignorant about your finances. But did you know it can also be dangerous to be unfamiliar with Mom and Dad’s financial health?
Expenses are rising for rent, health care, transportation and heating, among other items. And while these affect all of us, rising prices can have a magnified impact on people living on a fixed income.
When elderly parents fall short on money for necessities, their adult children often have to make up the difference. And that can come while the children’s costs are rising for things such as their own childrens’ educations.
Suprisingly, older parents think their adult children know more about what’s in their piggy banks than they actually do. A recent survey by the non-partisan Employee Benefit Research Institute showed that 63 percent of parents believe their children have knowledge of their income and expenses, while only 42 percent of adult children agreed.
TODAY Financial Editor Jean Chatzky suggests a few steps you can take to boost what you know about your parents’ finances, without hurting their pride.
Begin a conversation. Your parents likely come from a generation where it was just plain wrong to ask their children for help. Kids get help from parents, not the other way around. So, make it clear that you are there for them, even if it’s just to help them sort out their income and expenses. It might help to bring a third party in, such as a financial adviser.
Is their income enough? It’s crucial to know whether your parents’ income can cover their expenses. The older they get, the more detailed the knowledge needs to be. For example: What’s left on their mortgage? What do they pay each month in car expenses? What do they spend on a daily basis?
Where are all the papers? Adult children should know where their parents keep crucial documents such as a will, legal and financial contacts, medical directives (living will and health care proxy), insurance documents, financial statements and investment records. Get contact information for their close friends and for relatives.
Last wishes. As long as you are broaching the subject, you might as well find out what they would like done in case they are incapacitated.
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