While a lot has been studied and written about raising a child, we know less about the dynamic between adult children and their aging parents. At what point does the traditional caregiver role switch from parent to child? That question becomes even more critical when one parent dies. 

The major issues that adult children and aging parents need to confront have one thing in common: finances. From physical health to aging in place to declining cognition, how to help parents live out their final years with dignity is tied to their financial resources. 

How can you ensure that your parents’ financial health is sound? What protections and support can you put in place without overstepping boundaries? What resources are available to you and them to have productive discussions about issues of aging in place, wills, and related topics? 

Here are five steps that can help you navigate this challenging, but ultimately rewarding, responsibility. 

1. First, talk with other family members 

Start by talking with siblings and close relatives. If you don’t have those connections, there may be someone who knows you and your parents, maybe a neighbor or family friend, who can fill the role. 

Figure out the best way to begin the parental discussion, including who the best spokesperson is. It doesn’t have to be all of the children. It may be best to limit the initial dialogue to one person to avoid a sense of “ganging up.” 

And have the talk early—earlier than you think you need to. 

Studies indicate that the ability to make complex decisions like those involved in financial planning starts to diminish after age 60. Michael Finke, professor of Wealth Management and program director of the Wealth Management Certified Professional® (WMCP®) program at The American College of Financial Services, studies the relationship between cognitive decline and financial decision-making. 

As Finke told Kiplinger, “Often, by the time parents have lost their ability to make sound financial choices, they’ve also lost the ability to evaluate who they can and can’t trust.” That can open the door for ill-intentioned family members or outsiders posing as financial advisors. 

2. Provide help, not control 

It’s possible, and perhaps likely, that your parent or parents won’t see any need for your advice, at least not initially. So don’t give advice or try and take control — offer help instead. 

If your parents are still doing in-person banking, offer to drive them and take them out to lunch — an unforced way to meet their banker and transition to money talk afterward. If paying bills is becoming a chore, either because of vision challenges or forgetfulness, volunteer to step in. (And if you have a child who is old enough to take this on, even better). 

Another tactic: give the gift of technology, a tablet or laptop that they’ll need help to set up and learn. What begins as a great way to create and share photos of the grandchildren can transition to viewing their portfolio online and managing their bills. 

Gradually, you’ll become a natural part of the financial management “team.” 

3. Set up efficient systems 

With your foot in the door, you’ll get a better sense of what you’ll need to do next and how much responsibility you’ll need to take on. Simple observation can help: if you notice unpaid bills and collection notices on the kitchen counter, it’s time to become more involved. 

Set up automatic payments for essential ongoing services; credit card and bank statements can give you an idea of what these are and which may be redundant and/or unnecessary. Consolidate multiple accounts. As part of a volunteer spring cleaning, make sure you know where documents like wills and life insurance policies are located (and don’t forget the lockbox key). 

Finally, make sure that your parents are receiving every benefit they’re entitled to, from employer benefits to Medicare. 

4. Anticipate what’s next 

At some point, and depending on your parents’ health, you’ll need to assess the potential for long-term care. Check out options when there’s no immediate medical emergency to deal with, and include your parents in the process if they’re open to the possibility. 

You will also want to obtain a durable power of attorney, which gives you a broad range of responsibilities such as paying bills, managing assets, and filing taxes. A durable power of attorney remains in place even if your parents become incapacitated, and avoids the delay of going to court to be appointed the legal guardian. 

5. Enlist the help of a financial advisor 

If involvement in your parents’ financial affairs is problematic, enlisting the help of a neutral, outside expert may be best for you. Given the complexity of financial management, the amount of time it takes, and the emotional toll involved, it may be the preferred course of action, regardless. A credentialed advisor can provide your parents and you with the financial peace of mind that only comes with professional experience. 

While you’re at it, start thinking about your retirement years so your children won’t go through the same experience you have. If you’ve found a good financial advisor for your parents, they might be a good fit for you too. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

While our concerns will depend mainly on our individual situation — our age, job security, financial situation, and family obligations to name a few — here are some common areas to consider when we’re forced to manage finances in uncertain times. 

Check in on Your Monthly Budget

Before you can judge the effect on your monthly budget, you’ll need a monthly budget. If you have one, great. If not, this is the perfect time to create one. 

If you have a budget: 

• Evaluate your spending habits. Even if your personal situation is secure — job, health, savings, and long-term planning — things outside your control are volatile. Now’s the time to cancel that monthly subscription service you never use or the landline phone you don’t need. Eliminate any credit card debt to free up money in the future. 
• Assess your emergency fund. Experts say that, ideally, we should have anywhere from three to nine months stored away in an easy-to-access emergency fund — money in a savings account that you could live on if your income suddenly stopped. If you have an emergency fund, check on the balance. If not, take the money you saved from your monthly budget-cutting and start one.

If you don’t have a budget: 

• Start one. Keep it simple but comprehensive. Include all of your expenses and income. Monthly credit card statements come in handy here. 
• Evaluate your spending habits. See above. If you’re new to the budgeting world, you’ll likely be surprised at some of what you’re spending. 
• Start an emergency fund. If you didn’t have a budget, it’s unlikely you had an emergency fund. That’s okay — start one now. If you can set aside $25 a week, you’ll have more than $1,300 in the fund by this time next year. 

If your job is secure and you have adequate health insurance for you and your family, you won’t have to adjust your habits radically. 

But remember: leaking roofs and faulty transmissions have their own timelines. If you’re faced with an unexpected major expense, you may need to use your credit card as a fallback option. 

The Impact on Your Investment Strategy 

One of the biggest shocks from occurrences like the coronavirus is the instability they cause in the markets. Markets don’t like uncertainty, and large-scale buying and selling is more the result of panic than strategy. 

The best advice? Do nothing at the outset. 

That doesn’t mean that you shouldn’t reassess your investment strategy periodically. If you’re retired or near retirement age, you’re counting on your savings. Hopefully, your investments have shifted to a lower risk balance over time, which will enable you to weather the current storm. 

And while you may be tempted to sell stocks as prices drop, remember that the market has always bounced back (see below). Also, remember the tried-and-true adage: buy low and sell high. If you need immediate cash, it’s better to draw from bonds and give your stocks a chance to rebound. 

If you’re a ways from retirement, stick with your plan. And stop looking at your portfolio every day. 

Remember That We’ve Been Here Before

In the middle of a global crisis, it’s easy to think that we’re in uncharted territory. No doubt there are unique aspects to what’s happening, but we’ve faced the unknown before. And we not only survived, we came back stronger. 

Beginning with HIV/AIDS in 1981, there have been 12 epidemics that have impacted the markets, including SARS, H1N1, and Ebola. The impact of these outbreaks on market drawdowns averaged less than 2 months, with the exception of AIDS (5.1 months). 

Although epidemics can spur market corrections, their impacts are finite. That said, it’s difficult, if not impossible, to predict exactly how long it will take the market to recover when we’re still dealing with a pandemic. That’s why a steady, calm, and patient financial course is best. 

How to Move Forward 

It’s difficult to be a rational, calm investor in turbulent times. The best way to become one is to have a strong plan in place before the next roller-coaster ride comes along and stick with it. 

Because the ups-and-downs and complexities of investing can be overwhelming even in the best of times, consider working with a financial advisor who is trained in retirement income planning or wealth management planning, which means they will have the expertise to help you weather the storm with confidence. In the end, that may be your surest route to a smoother ride. 

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

At the same time, college is expensive. Here’s the average cost of tuition and fees in the 2019 — 2020 school year, as reported in the U.S. News annual survey: 

For private colleges: $41,426 

For public colleges: 

• In-state residents: $11,260 
• Out-of-state residents: $27,120 

Those costs don’t cover room and board. Also, consider that tuition tends to rise every year, with increases between four and 10%. Depending on your child’s age, you may be looking at a cost that’s considerably higher than what parents face today. 

Given everything that’s at stake — your child’s future and your financial stability — it makes sense to understand all of your options to pay for college. 

529 Plans 

529 plans, or “qualified tuition plans,” are savings plans sponsored by states, state agencies, and educational institutions. These plans offer tax-advantaged savings for educational expenses and come in two categories:

• Prepaid tuition plans. These plans enable you to purchase credits at public colleges and universities at current prices. The money can only be used for tuition and fees, not room and board, and most have state residency requirements. You receive the full value of the benefit only if your child attends the participating institution. Otherwise, you will only receive a portion of the benefits you paid. 
• Education savings plans. These plans can generally be used to cover expenses at any college or university, including some foreign institutions. These savings can also be applied to room and board. Also, under the revised 2017 tax code, education savings plans can be used for private elementary and high school tuition for up to $10,000. 
• Private plans. This is a prepaid tuition plan for approximately 300 participating private colleges and universities. 

529 plans offer a range of tax benefits. The compound savings are tax-free, and some states offer tax deductions and matching contribution incentives. However, some fees may apply to 529 plans, such as account applications and maintenance fees. 

The College Savings Plan Network provides links to all state 529 plans.

Grants 

The federal government, state governments, and colleges and universities provide grants based on financial need. Unlike loans, grants don’t have to be repaid. 

To qualify for a grant, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA) form. Colleges and universities also use this information to determine what need-based aid your child may be eligible for, including institutional scholarships.

Loans

Families turn to loans to finance approximately 20% of the cost of college. Educational loans are available from the government and from private lenders. Federal loans include more protection and better rates, so consider those first. Again, you’ll need to fill out the FAFSA to qualify. 

Students can take out federal loans, with first-year undergraduates able to borrow up to $5,500 and an additional $1,000 for every subsequent year. Direct PLUS loans are targeted to parents. While these loans come with a higher interest rate than student loans, the amount you can borrow is determined by the college and is intended to cover the full cost of attendance, minus any scholarships your child may be offered.

$2,500 Tax Credit 

The American Opportunity Tax Credit is a benefit for parents whose adjusted gross income is less than $90,000, or $180,000 if filing jointly. You can reduce your taxes after paying tuition, fees, books, room, and board by up to $2,500 a year per child.

Other Options

You may want to consider other savings and funding options, including:

• Roth IRAs 
• Traditional IRAs 
• FDIC-insured savings accounts 
• A home equity line of credit 

Whatever option, or combination of options, you choose, it’s best to start as early as possible. And know that you’ll seldom pay the college’s advertised “sticker price.” According to the College Board, undergraduate students in 2018-19 received an average of $15,210 in aid. 

To maximize your savings and ensure you’ve got the best possible plan in place, consider working with a financial advisor who specializes in long-term planning. Your child’s future is worth it.

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.

A reasonable assumption would be that the advisor on the other side of the table is required to act in your best interest; however, that is not always the case. Here are some questions to ask before deciding to work with a financial advisor. 

First, I recommend asking if the advisor is a fiduciary. It might be surprising to know that not all advisors are held to a fiduciary standard. Registered investment advisors are regulated by the SEC and are held to the fiduciary standard, which requires that they make recommendations based on their clients' best interests. 

Second, ask the advisor how they are paid. Are they paid a fee directly from their client, or are they paid by commissions and/or mutual fund trails? If they are paid in a way other than a fee from their client, this can be problematic because it presents potential conflicts of interest. For example, that advisor may be tempted to make recommendations to earn commissions rather than what’s best for their client. You should also ask what kind of investment products they offer. If the advisor is primarily recommending proprietary products, or products from their company, this may also present potential conflicts of interest. In my opinion, it’s always best to avoid conflicts presented by compensation. Financial advisors should be paid by their client and not product providers. 

Lastly, I recommend asking if the financial advisor holds any advanced professional designations, such as the CERTIFIED FINANCIAL PLANNER™ (CFP®) or Chartered Financial Consultant® (ChFC®). Many financial advisors choose to earn professional designations to set themselves apart from other practitioners by having a foundational financial education background. Having a strong background not only benefits clients through being able to offer sound advice, but it can also boost advisor marketability in an often-crowded marketplace. The American College of Financial Services first started offering the ChFC® in 1982 as an alternative to the CFP® designation. The CFP® is the more popular designation of the two; however, the ChFC® actually requires more coursework. The CFP® requires seven college-level courses, while the ChFC® requires eight. The topics covered are alike; in fact, the first seven courses under the ChFC® program satisfy the CFP® educational requirements. Additionally, the ChFC® includes modern topics not currently covered by the CFP® such as behavioral finance and planning for same-sex couples, divorcees, and blended families. The main difference between the two is that after completing the course requirements, CFP® holders are required to take and pass one comprehensive board exam, currently offered only three times a year, while ChFC® practitioners have to pass individual tests for each subject.

This content and information was created by a third party and not The College. The College assumes no legal liability for the accuracy, completeness, or usefulness of any such content and information and the views expressed therein do not necessarily represent the views of The College.