Are you seeing signs that your parents are struggling with financial tasks? If so, it may be time to step in to help. Managing your parents’ finances can come with as much stress as caring for their health. The strain of running two financial lives – yours and theirs – can become overwhelming. Without the right structure in place, you can easily make costly mistakes.
Why managing parents’ finances is so difficult
Most people think of caregiving as assisting with personal care. Caring for a loved one’s finances doesn’t get the same recognition and support, but it’s a difficult job, even under the best of circumstances.
It’s likely you only noticed a problem after something happened, such as unpaid bills piling up, missing paperwork, poor financial decisions, or that your parent was a victim of fraud.
You need to sort out the mess while also dealing with your own finances, such as supporting your children, paying down debt, or trying to save for retirement.
Family dynamics may also make it harder. Your parents may not want help, and your siblings may question your decision-making.
If you are also providing hands-on care, managing financial tasks adds to your burden, and when you’re stretched thin, things can get missed.
Common mistakes when managing parents’ finances
When you lack time and are under pressure from multiple directions, items can slip through the cracks. Some of the most common issues I see as a Daily Money Manager (DMM) include:
- Missed or late bill payments
- Lapsed insurance coverage
- Unpaid or mishandled insurance claims
- Duplicate or unnecessary subscriptions
- Increased exposure to scams or fraud
- Misplaced tax documents
- Forgotten required minimum distributions
- Caregiver’s own finances are neglected
Small mistakes can turn into expensive problems if they aren’t caught early.
Have legal authority before taking over
Before stepping in fully, make sure you have a valid power of attorney and correctly established account access. Acting without authority can create problems with financial institutions and family members.
Also, keep detailed records. Maintain organized records of payments, transfers, and major decisions. This protects you if questions arise later. Also, be transparent and communicate regularly with family members to reduce conflicts and misunderstandings.
Tips for managing parents’ finances
Creating a structure for keeping track of everything is crucial. Take these steps for both your finances and your parents’.
- Put all relevant information in one place.
Keep records of financial accounts, passwords, insurance policies, income sources, and recurring bills in one secure location, so it’s easy to find, and someone else can take over if something happens to you.
- List all monthly income and expenses.
Document every monthly income source and recurring expense, including which deposits and withdrawals are automatic and which are manual.
- Automate but review.
Set up automatic payments and deposits where appropriate but check statements monthly. Also, set up transaction alerts to catch errors or fraud early.
- Calendar due dates.
Set up calendar reminders on a shared calendar for quarterly or annual payments, such as for insurance renewals, property taxes, estimated tax payments, and required minimum distributions.
- Protect your finances.
Don’t pay your parents’ bills with your own savings. Have a budget and monitor your income and expenses. Review your savings and retirement contributions several times a year with a financial planner.
- Get help when it becomes too much to handle.
If you’re spending hours each week managing paperwork or worrying about what you may have missed, it may be time to consult a professional.
A Daily Money Manager (DMM) can suggest ways to improve your system. If you need more assistance, a DMM can also take on some or all tasks for you, providing you with regular reports so you’re still informed about all financial matters.
Don’t wait for a mistake or a crisis. Put the right structure in place to ensure that you and your parents are protected.
Lewis Knopf is a Daily Money Manager and Certified Senior Advisor. He is founder and owner of LK Daily Money Management.
