Managing Your Parent's Finances

Would you prefer to listen to a podcast on this topic?  This week's Financial Beeswax episode discusses Managing Your Parent's Finances.  

This blog is a repost from March to coincide with our Podcast this week.  Managing your parent’s finances may not be on your radar, yet, but many people are entering this stage of life or will be soon.  The task may seem overwhelming especially when you have your finances to manage.  Whether you have just begun, will start soon, or may be doing so already, here are a few suggestions to make the task easier.

            1)  Have your parents set up all income as automatic deposits into their checking account.  For example, if your parents are receiving social security, retirement, insurance, etc., income each month, have the money they are receiving deposited into their account instead of receiving paper checks.  Direct deposit makes it easier if they are not able to go to their financial institution to make deposits or if you do not live close to each other.

            2)  Have yourself added as an account holder on their checking and savings accounts.  It is important you are an account holder and not an authorized user.  As an account holder, you will be able to make changes to the account such as updating an address, setting up online banking and remote deposit capture, etc.  As an authorized user, you would only be able to make deposits and withdrawals.  If you are not able to have parents add you as an account holder, considering talking with an attorney about legal instruments such as a Power of Attorney to use when it comes time to manage your parent's finances.  There is more discussion in item #6). 

            3)  Set up online banking and remote deposit capture.  Online banking will allow you to log into the account to use Bill Pay, download monthly statements, view transactions, and much more.  Many adult children live in a different city or state from their parents.  If your parents live in another city or state, paying their bills using the financial institution's bill pay will make managing their account much easier.  Also, remote deposit capture allows account holders to make deposits into an account by taking a picture of the check.  Sometimes, you may receive a check for your parents that needs to be deposited.  Or, if you use a different financial institution than your parents and need to transfer money to them, you can easily do so with remote deposit capture. 

            Another factor to consider if you do not live in the same city or state as your parents are moving all accounts to the same financial institution.  Some banks are set up as co-ops, making it easier to transfer money from one account to another.  A significant number of credit unions are part of a Shared Branching network making it easier to transfer funds, and cutting down on fees.

            4)  Create a simple budget to keep track of your parent’s expenses to ensure timely payments.  A budget may be in the form of a simple list or using an Excel sheet.  If their income is direct deposited on a consistent basis, you could also consider setting up automatic payments.

            5)  Keep detailed records of transactions (e.g. deposits and payments), copies of written checks, and receipts.  Why?  For a few reasons.  First, companies sometimes lose payments or apply payments to the wrong account.  Also, at times deposits do not go into the right account.  Keeping records makes it easier to supply documentation when errors occur.  Second, if you have siblings, things can become uncomfortable when finances are involved.  If you keep detailed records, you can make the information available to any concerned parties.  Lastly, if you are no longer able to manage your parent’s finances for whatever reason, another person can easily pick up from where you left off, making the transition smooth and uncomplicated.

            6)  Obtain a Power of Attorney or other legal instruments to conduct financial business on their behalf.  There are situations where you may have to take care of a financial matter for them and having a Power of Attorney makes it easier.  For example, if your parent needs to upgrade their cell phone, but is not able to do so themselves, a Power of Attorney will allow you to take care of that.  Contact an Attorney to learn how a Power of Attorney or other legal instruments work and what you need for your particular situation. 

            Managing your parent’s finances can be stressful.  Using tools such as Quicken, Excel, and Online Banking can make the process much easier.  Also, getting things set up early removes confusion and frustration in an area that is often tense and uncomfortable.