There’s a good chance your children will have to get involved with your finances as you age. You might need them to help protect you from scams and fraud because financial decision-making ability does decline with age. You might need them manage your money for you if a health issue leaves you unable to do it yourself. And you will need someone to help settle your estate when you are gone.
However, you shouldn't wait until your children have to get involved with your finances to start sharing details about your finances with them. They'll be much better prepared to help if you've already provided them with essential information, have made a plan with them for emergency situations and have let them know what your wishes are.
The question, then, is how to have these conversations. After all, talking about your finances with your children can feel awkward. To make family money talks eaiser, this checklist will walk you through the process. Then you’ll have peace of mind knowing that your children have the information they need if they have to get involved with your finances.
Step 1: Choose the right time to talk
Conversations with your children about your finances can happen naturally. But even if you are able to broach the topic casually, you should set a time to have a more in-depth discussion – or a series of discussions – with them to share details about your finances.
That time should not be during a holiday gathering – even if it’s the one time of year that you and your children are together. There could be people there who don’t need to be a part of the conversation. And if someone has had too much wine, the conversation could go downhill real fast. At least wait until the day after a holiday meal to let your children know you want to talk to them about their finances. Ask them what a good time would be for them to sit down with you to have the conversation, then make it a date to talk.
Step 2: Have a plan for starting the conversation
Before trying to talk to your parents about their finances, decide what approach you want to take to . If money is not a taboo topic in your family, simply let them know that you want to share some information about your finances so you can all be on the same page and be prepared in case there is an emergency.
Otherwise, you could use any of these indirect approaches to get your children comfortable with the idea of discussing a topic they might consider awkward:
- Use a story about someone you know whose children had to help him or her out and discuss how you want to be prepared for a similar situation.
- Talk about your financial planning experience if you've met with a financial advisor or an attorney to update estate planning documents. You can even say that the financial or legal professional you've met with encouraged you to talk with your children.
- Use current events, such as the pandemic, to talk about the importance of emergency planning. You could tell your children where your estate planning documents are as a jumping off point for talking more in-depth about how to prepare for worst-case scenarios.
Step 3: Share information
The more information you're willing to share with your children (or the child you expect to help with your finances if necessary), the better able they'll be able to help without having to play detecitve. However, you don’t have to do it all at once. It can happen over several conversations. You can start by sharing the following information:
What sort of estate planning documents you have: Let your children know if you have a will or living trust. You don't necessarily have to tell them who gets what. They just need to know if you have one of these documents and where it is located. You also need to let your children now if you have power of attorney and advance health care directive documents. It’s especially important that you draft and sign power of attorney and advance directive documents before you have any issues that could affect your competency – such as a stroke, dementia or coma. These documents allow you to name someone to make financial and health care decisions for you if you are unable to do so themselves. If something were to happen to you and you didn’t have these documents, your children or other family members would likely have to go to court to be appointed your conservator or guardian to make financial and health care decisions for you.
How do you pay your bills? Providing your children with this information will allow them to ensure your bills are paid in case of an emergency. Share whether your bills are paid automatically, or if you write checks. If it’s the latter, you need to have named someone as power of attorney to sign checks for you if something happens to you. Or, consider setting up automatic bill pay to make it easier in case something does happen.
If you are willing to share more information, let your children know what your sources of income are, what sort of insurance policies you have, whether you have debt and what your final wishes are. Rather than tell your children, you could make a list of all of your financial accounts, usernames and passwords, Social Security number, Medicare or Medicaid number, and locations of property deeds and titles. The more information you can share, the better prepared your children will be to help as you age. You can store the list someplace safe and tell your children when and how to access it.
[ Read: The Ultimate Guide to Power of Attorney ]
Step 4: Discuss your retirement plans
You don't necessarily have to tell your children how much you've saved for retirement. However, you should either assure them that you have enough to support yourself (if that's the case) or give them a heads up that you might need support as you age. You also should let them know whether you plan to travel often or relocate. This could affect what plans they make for childcare if they have their own children.
If you need help planning for retirement or determining how long your savings will last, consider meeting with a fee-only financial advisor. You can find one through the Financial Planning Association’s member directory at PlannerSearch.org or the National Association of Personal Financial Advisors’ directory at NAPFA.org.
Step 5: Discuss long-term care plans
The topic of long-term care also needs to be a part of money conversations with your kids. Medicare does not cover the cost of long-term care, and the median annual cost of care can range from $19,500 for adult day care services to $102,200 for a private room in a nursing home, according to insurance company Genworth. So you need to have a plan to pay for care if you need it.
If you're still healthy and in your 50s or early 60s, look into long-term care insurance. You can find a long-term care insurance broker through the American Association for Long-Term Care website. You also could meet with a financial planner to figure out if you can afford care on your own.
If you don't have a way to pay for long-term care, you need to let your children know if you're hoping that they will help care for you if necessary. This could impact their finances because they might have to take time off work or even quit a job to provide that care. Knowing sooner rather than later that they might have to help you will give them time to make adjustments and bolster their own finances.
[ Keep Reading: What to Know About Long-Term Care ]