As our parents get older, their money problems can sometimes become our problems if we don't plan ahead. And if we're raising our children at the same time, there's a reason they're calling us the “sandwich generation”.
Today on the show, I have invited Cameron Huddleston to talk to us about how we can have that money talk with our parents and why we need to do it right away.
Cameron is the author of the new book, Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances. She's also an award-winning personal finance journalist whose work has appeared in the Kiplinger's Personal Finance, the Chicago Tribune, Yahoo Finance, and MSN.
Andy Hill: Why did you write a book on this subject?
Cameron Huddleston: I wrote it because of my own experience with my mother. She was diagnosed with Alzheimer's disease when she was 65. I was only 35. I have three kids. At the time when she was diagnosed, I had two. One of them was still in diapers. Talk about the “sandwich generation”.
I had not had conversations with my mother about her finances. But suddenly, I was thrown into a position where I was going to have to start helping her with her finances. Not knowing what sort of accounts she had, it was like trying to put together this puzzle without knowing what the final picture was supposed to look like.
On top of it, emotions were running high. My mother is realizing that she's having trouble remembering things. I'm trying to step in, for obvious reasons, and it made it very awkward.
If I had talked to her sooner, we would have had a much better plan. We wouldn't have been figuring things out on the fly, I wouldn't have felt like I was making decisions for her without having input beforehand as to what sort of care she would want, how she would want things handled.
Fast forward several years from the point when she got the diagnosis, my friends started coming to me, asking me, “How do I talk to my parents about their finances? I'm noticing that mom is having issues. I don't know how to do it. I don't know what I'm supposed to know.”
That's when I realized that my own experiences could help other people. That people didn't have to go through this on their own like I did. That's why I wrote the book.
How early should we be speaking to our parents about their finances?
I would say even before your parents reach their 60's, if possible because you never know what can happen. I hear this all the time from people, saying, “I don't need to have this conversation yet. We're not there yet. My parents are still healthy. They're relatively young.” This is the perfect time to have a conversation.
Not only was my mom diagnosed with Alzheimer's at 65, but my father also died from a heart attack at the age of 61, and he died without a will. My father was an attorney, and he should've known better. He should've had a will. He was in a second marriage and that was really fun to deal with. No time is honestly too early to have this conversation.
If you're in your 20's, and you don't think you have your financial life together yet, it's a great way to start the conversation by asking your parents for advice.
Why is discussing our parents' finances so difficult?
Well, 9% of adults would rather talk to their parents about their parents' romantic lives than talk to them about their finances. It goes to show how afraid people are of talking about money.
There are a variety of reasons. We don't want to talk about it because, maybe, we're raised to think it's taboo. My father certainly told me, “You don't talk about money. It's impolite.” And so, if your parents have told you this all your life, then you know, deep down inside, that if you go to them and say, “Hey, Mom and Dad, I really would like to have a conversation with you about their finances,” they're going to say, “Well, what did I teach you when you were growing up? We don't talk about this sort of thing.”
So you've got that fear, perhaps. You might be afraid that if you start asking questions, your parents are going to think you're being nosy, or better yet, they're going to think you're greedy. You're asking this because you want to know, “Mom and Dad, what's in your will? What am I going to get?”.
I want people to realize that, most likely, you are making this conversation out in your head to be worse than what it actually will be.
If you have a good relationship with your parents, it might be a little awkward when you first bring it up. But if you approach it carefully, and you let them know that you're having this conversation out of concern for them, because you want to have a plan and be able to help them as they age, they're going to realize that, indeed, you are having this conversation out of love. Not because you're being nosy and not because you're being greedy. As scary as these conversations seem, the consequences of not having them can be so much worse.
What's the best way to approach this money conversation with our parents?
Use Yourself as an Example
Say you did recently meet with an attorney to draft a will and other estate planning documents. You go to your parents and say, “Hey, Mom and Dad, I just met with an attorney recently. My partner and I just drafted a will, and I want you to know that I have this document. I want you to know where it is. By the way …
- Do you have a will?
- Where can I find it?
- If, when something happens, do you have power of attorney?
- Do you have a living will?
Or maybe you met with a financial planner, or maybe you used a retirement calculator and said, “Hey, I found this really awesome retirement calculator. It's been so helpful because now, I actually know how much I should be setting aside for retirement. What sort of things have you done?”
Ask for Advice
“What helped you in planning for your retirement? I'd love to get some tips from you.”
You could use a life event. Perhaps your parents recently got divorced, as mine did when I was actually in college. Plenty of adults are getting divorced later in life, and you could use that as an opportune moment to say, “Mom, I know this divorce has been very difficult, but I would really like to talk to you. Now that Dad's no longer part of your life, and there to help support you financially, to make any financial decisions for you, if something happens to you, let's talk about how I can help you out. What you would need from me if something were to happen to you so I can be there and be prepared?”
Use a Story
By our age, we have friends who have had a parent who's passed away, or maybe they've had to take time off work to care for a parent. You probably have a friend or a colleague whose story you could use to get the conversation started with your parents, talking about what happens if you don't plan, or the benefits of having a plan. “I have a friend whose parent died. They had a will. They had everything in place, they had conversations, and it made things so much easier for my friend in a very difficult time. Let's talk so we can have a plan in place too, to make things easier.”
What are some of the wrong ways to do “The Money Talk” with your parents?
Don't Be Condescending
If you come to your parents as, basically, a know-it-all, “Hey, Mom and Dad, you should be doing this with your finances. I'm on top of my retirement savings, but I know you're not, and I don't want you to move into my basement when you get older.”Nothing is going to shut a conversation down faster than if you come in and you're condescending.
It's not just what you say, but how you say it. If you're talking to your parent like you're talking to a child, they're going to pick up on that. You know, the, “Bless your heart. I mean, gosh, Mom, I just see all these people taking advantage of you, and you're writing these checks left and right. I mean, Mom, come on.” She's going to pick up right away that you're being condescending. So you don't want to do that.
Don't Issue an Ultimatum
“If you don't talk to me, Mom and Dad, then I'm not going to help you when you get older.” Again, not something you want to do. You want to approach them with respect. These are your parents, and even if you know they haven't made smart financial decisions, even if you don't agree with what they're doing with their money, it's not your job to come in and tell them how to manage their money.
You can offer them suggestions, you can offer them help. You can use yourself as an example. But the point in these conversations is to get some information, create a plan, make sure they have legal documents so that in case they really do need your help, that you can step in and have legal access to their finances if you need to make financial and healthcare decisions for them.
What type of information do we need in order to help them?
Of course, the more information you can get, the better. But if you can only find out one thing, you need to find out if they have estate planning documents. And you hear the word estate, and that makes you think, “Oh, this is something only rich people have. If you've got a mansion, if you've got a big estate, you have an estate plan.”
That's not true. And unfortunately, a lot of people think this. They think, “I don't have a lot of money. I don't have a lot. I don't need a will.” But that's not true. You need to find out if your parents have a will, because if they don't have one, basically, the state has one for you. And you need to let your parents know this.
“Mom and Dad, you don't have to be rich and famous to have a will, because when you die, if you don't have one, state law is going to determine who gets what. Maybe you think Mom's going to get everything, but that might not be the case, in our state. It might be divided evenly between Mom and the kids, but Mom needs everything to continue supporting herself when you're no longer there. So you need to put your wishes in writing, or else a judge is going to determine who gets what, and there could be fighting.”
Your parents need to have a power of attorney. This is a legal document that designates someone to make financial decisions for you if you no longer can. There are a couple of different types of power of attorney. Really, the best one to get is a general durable power of attorney. It covers everything. It gives someone power to make any sort of financial decision for you, and it remains in effect once you are mentally incapacitated.
You might have a sibling who's better suited for this role. You might have a cousin, an aunt, an uncle. It's so important your parents name someone they trust, and you can let your parents know, “You're not giving up your power. In fact, you're exerting control over who gets to make these important decisions for you if you no longer can. If you don't make the decision, a judge could appoint someone, or someone could step up and go through the court process, and it might not be the person you want.”
So it's so important that they have a power of attorney. And then finally, the living will, it's also called an advanced healthcare directive. This spells out what sort of end of life medical care you do or do not want, like, do you want to be on life support? And it lets you name a health care proxy, someone to make healthcare decisions for you.
Again, without it, if you're in a coma, and your grieving family members are there, trying to figure out whether to keep you on life support, they have to make that decision, and if they don't know what you want, it's a really difficult decision to make. And so, your parents should be the one making that decision, and let them know, “I don't want to make these decisions for you. This is up to you. This is why you need these documents.”
Related Interview: Why You Need a Trust to Protect Your Family
And they might say, “Well, they're expensive.” And ideally, you should meet with an attorney. It can cost up to $1,000 or more to have all of these documents drafted. But the cost of not having them, if your family has to go to court to become your conservator, to make healthcare decisions, financial decisions for your guardian, this can cost tens of thousands of dollars.
And certainly, you, as the child, if you're in a financial position to pay for this, offer your parents to do it for them as a gift. “Mom and Dad, I'd love for you to meet with my attorney. Think of this as my Christmas gift to you, or think of this as my Mother's Day gift, or my Father's Day gift. I want to make sure you have these documents because I want to make sure your wishes are in writing.”
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