By Daniel Rodriguez | Dr. Budgets
Talking to your parents about money isn’t necessarily the easiest subject to introduce. It is one of those taboo issues we are not “supposed” discuss, right? If fact, money is such a delicate subject that many people just skip the money conversation altogether and hope for the best. Without proper planning and communication, however, things may not turn out how your parents intended.
I don’t have a formula on how to bring up the topic of money with your parents. Each relationship is unique. You have to figure out how to have that conversation based on the relationship you have with them. What is important is that you do have that money conversation with them.
So, once you have initiated the “money talk” with your parents, what exactly do you discuss? Below are the top three topics I feel are important.
Spending and Debt. How do their spending patterns and overall debt structure impact their plan for retirement? The more they spend, the larger the nest egg they will require. If they run out of money during their golden years because they failed to properly plan, helping them could fall on your shoulders. Their level of debt heading into retirement also impacts how much money they will need. If possible, they should limit the amount of debt they are carrying as they approach retirement. Spending and debt can be a complicated topic to delve into, so if you feel that they need guidance in this area, put them in touch with a money coach or a financial advisor who can work with them to create a spending plan and debt repayment plan.
Trust. If your parents pass away without a living trust, they could be subject to the costly and lengthy probate process, even if they did not own much. Not only is it expensive, it also becomes public record, so it is not very private. To bypass this you should ask your parents to have an estate planning attorney draft a living trust for them. When I explained to my mom the costs and time-consuming nature of the probate process, she hired an attorney to draft her trust. For more information on estate planning, you can read our interview with an estate planning attorney.
Insurance. Are your parents properly insured? You may want to bring an insurance expert into the conversation to ensure they are adequately insured. Do they have the right health insurance? Are they properly insured on their auto and home? Do they have umbrella insurance coverage? Do they have life insurance? Long-term care insurance? If they have gaps in their insurance coverage, the financial responsibility could fall on you if something catastrophic happens that their insurance doesn’t cover. Talk to your property and casualty insurance specialist and your life/health/disability insurance specialist to learn more about what to ask and how to ask it. If you would like to meet with an insurance specialist, let me know so I can introduce you to the best ones in my network.
These are three of several topics you can discuss when you are talking to your parents about money. More importantly, you will be opening up the lines of communication with your parents about money. And that, in my opinion, is priceless. If you have any questions you can contact me or leave a comment in the comments section below.
- Published in Family