How to Start the Money Talk with Your Parents
by Bonnie Vengrow
When Catherine McGinnis of New York, N.Y., first approached her mom, then 75, about her financial plans, she was prepared. After years of hearing her mom complain about how difficult it was to take care of her three–story home, she decided it was time to offer a few new alternatives – and had researched several senior citizen–friendly apartments nearby to help her mom through the process.
But her plan completely backfired. "The minute I brought up the notion of selling her house, she completely flipped out," McGinnis says. "She was so upset that she hung up on me – and then called me back an hour later to continue the tirade, letting me know that she would not be going anywhere. Ever."
It was a tense few months before she approached the topic again. "The idea of moving was clearly off–limits, so I waited for the right opportunity to start the conversation from a different angle," she says. The moment finally presented itself one day, when her mom joked about decluttering the house so that they'd have less work to do when she was gone. McGinnis seized the chance to have "the talk" – but this time, in a much more informal way. "We laughed about all the silly things that she had kept over the years, and started talking about where the important things were, and what she wanted us to do with everything when she was gone," she says. "It was an honest, relaxed conversation – a world of difference from my first attempt."
Set a positive tone from the start
Talking about money with aging parents may be one of the trickiest, most fraught conversations you'll ever have. For the parents, there may be the fear of losing control as the child assumes a more prominent role in their financial life. For the adult child, there's the balancing act between respecting parents' boundaries and ensuring they've thought out their financial future.
"The conversation will pretty much always feel weird and forced. It's nerve–wracking to bring up," says Manisha Thakor, Director of Wealth Strategies for Women at Buckingham & the BAM Alliance and author of Get Financially Naked. "Rather than try to fight that, work with it. Acknowledge it. Use it as part of the opener: 'I've been terrified to bring this up.'"
The conversation will pretty much always feel weird and forced. It's nerve–wracking to bring up.
It may also help to thank your parents for however they positively impacted on your life – "an essential first step," she says. Then you may want to steer the conversation to what kind of legacy they'd like to leave. Think stories, keepsakes, or endowments – not inheritance. The next question can be about their financial fears and how you can help with them. "I find the arc of gratitude, legacy, fear tends to keep [at bay] the emotions that shut people down," she says. "It's almost like you primed the heart to stay open during the scary fear part."
If a formal sit-down isn't your style, you may also try bringing up a topic casually in conversation, suggests Sonya Britt, associate professor at the Institute of Personal Financial Planning at Kansas State University, CFP®. "Instead of saying, 'Do you have an estate plan?' you can say something like, 'I've been reading a lot about wills and preferences for living wills, and am wondering if you and your partner have thought about these things. I've been reading about it, so maybe I can answer some questions you might have.'"
No matter how you decide to start the conversation, the end goal is to have a fruitful, honest, judgment–free discussion with your parents about their money and how you can help them plan for the future. Here are some questions Thakor and Britt recommend to help keep the discussion going.Where do you save all of your important documents?
Make sure all of the proper documentation is in place, including basic estate paperwork: a will, deeds, medical and legal powers of attorney, and trusts that are properly drafted and funded. There should also be a list of any passwords associated with assets or important accounts and instructions on how to access safety deposit boxes. Taking inventory could open up a conversation about any missing documents and whether an estate planner can help get things in order.Where do you want to live?
Figuring out your parents' housing plans in the event of an illness or a partner's death is best handled before a crisis arises. Where do they want to retire? Do they want to stay in their own home or move near you or a sibling? You'll also want to discuss whether they want to live in a nursing home or assisted care facility and, if so, how much that would cost and whether they'll rely on long-term care insurance.Have you thought about health care costs and how you plan to cover them?
A large portion of a retiree's budget will go toward health care expenses. According to a 2016 study conducted by HealthView Services, a healthy 65-year-old couple retiring this year will pay roughly $288,400 over the course of their retirement just on healthcare premiums. More will be needed to cover out-of-pocket expenses and long-term care costs. Determine now whether your parents have enough to assume these costs and, if not, whether you and your siblings need to contribute.
A healthy 65-year-old couple retiring in 2016 will pay roughly $288K over the course of their retirement just on healthcare premiums.Do you have any financial concerns, and how can I help with them?
Thakor says the most common financial fears she hears from aging parents are being a burden on their children, losing control over their lives and decisions, and running out of money. All tough issues - and ideally, you'll enter the conversation armed with information and some recommendations for your parents to consider.
If your parents are worried about being a financial burden, for example, you'll want to explain clearly and honestly how much you can afford to spend to help them out. "It may be awkward to put a dollar amount on the table, but by sharing at this deep level, you alleviate their fear because you have identified the point beyond which helping them would start hurting you," she says.
If losing control is a concern, you can suggest working together to set up a system so your parents can continue to enjoy their independence. That could mean putting money into a joint account and receiving alerts on where the money is going - a safeguard if your parents' cognitive skills are declining.
If your parents are worried they'll outlive their savings, Thakor suggests asking a financial advisor to run a retirement spending analysis based on various levels of spending and expected investment returns. "By doing this analysis with a financial professional, you move from the vague area of 'worrying' to the very clear space of 'knowing' what the levers are - spending and returns - and the implication of movements of each in either direction," she adds.
A financial advisor can also be useful if your parents are starting from square one or if they don't know how to start thinking about retirement planning.
Dealing with resistance
As McGinnis saw firsthand, money can be a third–rail topic for some parents, and they may respond with resistance or denial. Sometimes, it helps to take a break and revisit the conversation after a few months, when everyone has had a chance to give it some thought, Britt says. "You can wait six months or so and say, 'I know you weren't interested in talking about this before, but I keep reading about it and I've been thinking about it. Have you been thinking about it more? Do you want me to help you find someone to talk to about it?'"
In fact, many times it helps to bring in an outside third party, like a CPA, estate lawyer, or financial advisor that your parents trust when starting financial planning for seniors, Thakor says. "Any one of those three professionals can be a great wing person to bring in and make your parents feel like they are in charge," she explains. "Having that external third party that they would perceive as being on their side can also augment that feeling and give them the confidence to carry on with the conversation."
While it's not easy for aging parents or their children to talk openly about money, having that conversation while everyone is healthy and capable of making sound decisions can save stress and confusion down the line. To learn more about why we're reticent to discuss money – with parents or anyone else – check out The Science Behind the Last Taboo.