Financial issues have a tendency to snowball. For example, a missed credit card payment can lead to a fee, which leads to a higher balance. Too many missed payments can lead to interest rates increases, which lead to both higher balances and increased cost for credit – making that original debt even more expensive and difficult to manage.
When we’re young, financial mistakes are common and relatively easy to overcome. After all, young people have a lifetime of earning ahead. But older adults don’t necessarily have the benefit of simply working harder and earning more. So there’s a unique risk with the financial lives of elderly. In some situations, their financial health can rapidly become precarious without timely intervention of adult children.
Here are some warning signs that your parents’ finances could be in trouble:
- Bills are paid late, or not at all. Anyone can miss a payment deadline now and then, and some people find tracking bills harder over time. If a pattern of late payment or non-payment develops, however, it's possible something more serious is at play. If you see mail from creditors demanding payment – or have noticed piles of unopened mail – it could be a sign that you need to investigate further.
- Money and rising costs are frequent topics of conversation. If your parents begin to complain about the rising cost of goods and services, or simply begin discussing money with much greater frequency, it may be an indirect signal they are having financial issues. Because it's often difficult for people (especially parents) to come right out and admit they are in trouble, they may drop indirect hints, hoping you'll pick up on what they're going through.
- There are repeated episodes of forgetfulness and money mismanagement. Forgetting to cash the occasional check timely – or misplacing your purse or wallet – isn't atypical behavior for older parents. Yet allowing uncashed checks to pile up, making large, expensive and out of character purchases, and gambling more than normal are all signs that a real problem could be at hand. As we age and deal with cognitive issues, routine forgetfulness can sometimes turn into episodic memory loss and impulsiveness.
- You feel they may be vulnerable to a scam. Because some scams move quickly and may involve perpetrators in other countries, recovering losses can be difficult – which is why early awareness and reporting to authorities like the FTC or your financial institution matters. Closely monitoring unusual calls, texts, emails, social media invitations, and other common scam techniques can help reduce the risk of falling victim – though no single step eliminates the threat entirely.
- They become careless or excessively generous with their money. If you find significant sums of money in odd places – or in accounts that seem to have been forgotten – it may be worth a closer look at how accounts are being tracked. Likewise, excessively large donations to charitable causes, or a newfound desire to give away possessions to friends or family members, may be a red flag that something is awry.
When to Step In
Your parents have worked hard for what they have. It's important that it be protected. If you’re concerned about their financial well-being, the first step is to gather all documentation about bank accounts, assets and investments, tax information, retirement policies, credit cards, financial advisors, and household bills. Then look closely at cash flow, budgets, and expenses.
If your parents absolutely won’t confide in you about their financial details, encourage them to speak with a trained financial advisor such as a financial planner, CPA, tax or elder issues attorney. It can help to explain why you're asking – that you want to help protect the savings and income they've worked for. Some families find these conversations go better when a neutral professional is part of them.
Keep in mind that your parents’ decisions about their assets, income, and investments are theirs to make. How much they spend of their money and on what is up to them, even if you disagree with them. In general, adults control their own money, and family members may have limited authority to step in. What you can legally do depends on your state's laws and on arrangements like a power of attorney or joint account. An elder law attorney can explain the options that apply to your family's situation.
