As you start your journey into personal finance, you’ll be looking at your numbers and trying to figure out your life ahead. One thing you may realize soon is that you’ll have to consider your parents as well as yourself.
Your parents are aging too. How are they doing with their money? Is there an expectation that you’ll take care of them?
Talking to your parents about money can be awkward but it’s necessary. Read on to learn how to discuss finances with your parents.
My Story
Over the years, I’ve had my own personal finance journey that included paying off $81,000 in debt, as well as starting to save and invest for the future. As I started to get my finances together, I wondered about my parents.
I’m an only child, so if something were to happen to them, it would be up to me to take care of things. Obviously, this realization was tough and I wanted to be prepared. But how could I start a conversation with my parents without being rude or intrusive? So, I decided to open up the discussion with my own journey and then lead into questions about their financial situation. Here was my opening line:
Me to my parents: “Yeah, I just opened a SEP-IRA and am investing with index funds to help fund my retirement. I’m a bit behind because of my debt but plan on catching up. Do you have plans to retire soon?”
Asking that question opened up the conversation. They told me their timeline for retiring and gave me a clue about where they’re at financially. Once the conversation was open, I asked if they had any life insurance. I expressed that as an only child I wanted to be prepared if something happened to either of them. I also explained that life insurance would help cover burial costs and loss of income.
My parents confirmed they did have a life insurance policy. Phew! I breathed a sigh of relief.
Starting this discussion with my parents opened up the opportunity to talk about how I can prepare now if something happens to them.
It was a win as my parents created a folder for me that contained their financial documents like wills, insurance information and more. I now also have their passwords, a key to their house, and other relevant financial information.
The takeaway: When someone dies, your whole world turns upside down. You’re grieving and have to deal with so many other logistics. But on top of that, there are financial matters that need to be taken care of. If you never have a discussion with your parents about money, this can get messy. But taking steps now can ensure that you and your parents are financially prepared.
How to Start the Discussion
To get the conversation started with your parents, first talk about your life goals and finances when it comes to retirement. Then gauge the room and see if it seems appropriate to ask them about where they’re at with retirement funds.
You can also broach the subject of life insurance and wills by saying something like “I’m looking into life insurance options and preparing a will. Just curious if you have life insurance and a will? I’m looking for recommendations.”
If they say “yes”, you can ask if they have a sufficient life insurance policy to cover everything. You can also ask whether their will is updated and if you can access it in the event that something happens to them.
If they say that they do not have a will or life insurance, the door is now open for you to say something like, “A will and life insurance could be helpful for you, too. I want to make sure you’re prepared if anything happens.”
Ultimately, it would be great to review the following in detail with your parents:
- Retirement savings
- Wills. A will can help clearly state someone’s wishes so there is no confusion when they pass. It’ll help make the process less of a hassle. You can use a tool like Fabric to get life insurance online as well as create a free will. Tomorrow also offers wills at no cost.
- Health care proxy. A health care proxy is a document that appoints someone to make health-related decisions on your behalf if you’re unable to do so.
- Life insurance. Life insurance will provide a lump sum of money to the beneficiary upon the death of the account holder. That money can help pay for burial costs and cover any loss of income. On top of that, naming beneficiaries for retirement accounts and any other financial accounts is important as well.
- Disability insurance. This type of insurance helps provide income to a worker who is unable to work due to a disability or illness.
- Debt. In many cases, debt may be discharged in death or paid off by the estate. If there is a joint account holder or co-signer, it’s likely the debt will be the responsibility of the other party.
This is a Discussion You Should Have
Talking about finances with your parents is tough but will put your mind at ease.
Remember: Life happens fast and anything can happen – sometimes unexpectedly. It’s important to be prepared.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.
