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Many adults face financial stress, and it varies from person to person. But this stress is incredibly challenging for seniors, especially those who are already in retirement. This was evident in the findings of the Federal Reserve Board’s Older Adult Survey back in 2014 and is very much persistent today as well. The leading causes of financial stress among older adults revolve around fixed cash flow and healthcare costs, including nursing home or assisted living costs.
These financial worries can take a toll on the overall well-being of older adults. One of the most important things you can do to help your senior loved ones is to provide them with financial advice or assistance whenever they need it. In this blog, we will discuss what causes financial stress in the elderly, how it affects them and how to manage elderly parents’ finances to take some of the stress off their shoulders.
What is financial stress?
Financial stress occurs when a person experiences anxiety and worries about their finances. It can be prompted by a number of factors, such as unemployment, debt, and low income. Financial stress can lead to a range of negative outcomes, such as depression, anxiety, and problems in relationships. It is important to address financial stress early to prevent these negative consequences.
What causes financial stress in the elderly?
There are a number of reasons why elderly individuals may experience financial stress. Let’s explore some of the main reasons why older adults go through financial anxieties.
1. Fixed income
Fixed income can cause financial stress in the elderly for a few reasons. For one, it may be difficult to live on a fixed income that is not adjusted for inflation. Additionally, if the elderly person has substantial debts or medical bills, they may find it challenging to make ends meet on limited earnings. Finally, if an older adult lives on a fixed income, they may be less able to cope with unexpected expenses or financial emergencies.
2. Increased medical expenses
As people age, they often require extra medical care, which can lead to increased expenses. This can cause a lot of financial stress for elderly individuals, who may already be on a fixed income. They may have to make difficult choices about whether to pay for medical care or other essentials like food and housing. And if they don’t have adequate health insurance, the situation can get worse.
3. Reliance on government benefits
Many senior citizens rely on Social Security and other government benefit programs as their main source of income, which is only sometimes enough to cover all of their expenses. It can add stress and anxiety as these benefits could run out or discontinue, leaving the recipients struggling financially.
4. Falling victim to scams
The elderly often fall victim to scammers because they may not be as tech-savvy as younger people, and they may be more likely to trust someone they don’t know. Additionally, scams can be emotionally stressful, leading to further financial problems. Older adults who are scammed may be less likely to report the crime. This can lead to further financial losses as the scammer continues to take advantage of the victim.
5. Cognitive decline
Cognitive decline can lead to many problems for older adults, including increased financial stress. This is because cognitive decline can lead to a decrease in the ability to manage finances effectively. This can increase the chances of making costly mistakes, like forgetting to pay their bills or overspending on unnecessary items.
How does financial stress affect the elderly?
The elderly is more at risk for experiencing the negative effects of financial stress than any other age group. Some of these effects include:
– Poor physical and mental health
– Depression and anxiety
– Social isolation
– Financial insecurity
– Relationship problems with family and friends
How to manage elderly parents’ finances?
Managing elderly parents’ finances can be a delicate task. On the one hand, you want to respect your parents’ independence and autonomy. On the other hand, you need to make sure that their assets are in order and that they are not putting themselves at risk. Here are some tips for managing parents’ finances:
1. Offer them some advice
You could provide them with better advice on managing their finances, such as what bills they need to pay and when to do so.
You may also help them find a reputable credit counseling agency or other service providers if they need financial assistance. You can also provide some pointers on the different types of available financial services, such as credit counseling and debt consolidation.
You can also offer some monetary assistance if needed or even set up a retirement income plan for them. This might be especially important if they depend too much on Social Security benefits alone to meet monthly expenses.
2. Help with spending and saving money
Since seniors will be living on a limited income, you may want to review their budgets carefully. Make the necessary adjustments, so they aren’t constantly stressing about how much their limited funds are being spent.
You could help by teaching them how to manage their money or even creating a budget together.
You can help them find the best way for them to save their money. For example, you may teach them how to use a credit union or bank account for senior citizens to save without worrying about high fees.
3. Explain how to research financial planning resources
Explain to your parents how to research financial planning resources online and by searching for “financial planning resources for seniors.” This will bring up a variety of websites that offer advice and tips on managing finances as a senior. It’s crucial to be as specific as possible when conducting your search, so try keywords like “retirement planning,” “estate planning,” and “money management.”
Another great way to find financial planning resources is to seek recommendations from friends and family. Chances are, someone you know has gone through the process of helping their elderly parents manage their finances, and they can point you in the right direction!
If available in your area, you could offer some resources where seniors can receive financial assistance from government programs such as Medicaid and Supplemental Security Income.
4. Consult a financial expert
If you’re a senior who feels like they are in over their head (either with debt or just generally confused about financial planning), you can consult with a financial planner or an elder law attorney. These professionals have extensive experience in helping seniors manage their finances, and they can provide you with tailored advice based on your unique situation.
There may be some areas where they need improvement, and other times it will feel like a relief when an expert breaks down the situation for them.
For seniors on a fixed income, there may also be programs out there to help pay bills and manage finances. It never hurts to try looking into these options, especially if they are considering selling their home to pay off mounting debts, because there may be better alternatives.
5. Be communicative and do not overwhelm them
You’ll need to be communicative with your parents about their finances and make sure that they’re comfortable with the plan you’ve put in place. Also, be sure not to overwhelm your senior loved one. But, also take note if they need help with something. From there, take a look at your financial situation and see if you can make any changes to help them. That way, they won’t have to worry about these things on top of everything else in their life.
It’s important to understand that financial stress is not limited only to seniors and those with specific medical conditions; the fear of it can escalate quickly for some people. It might seem like an overwhelming task, but take one step at a time, and you’ll also find yourself in a better place emotionally.
Benefits of financial planners for seniors
As people age, they often find themselves with more financial responsibilities and less time to manage their finances. Financial planners can help older adults navigate this situation. Here are some benefits of financial planners for seniors:
1. Provide guidance
As people age, they often find themselves with more financial responsibilities and less time to manage their finances. Financial planners can assist seniors in handling this complex landscape and making the most of their retirement years. A financial planner can provide guidance on a wide range of financial issues, including Social Security benefits, Medicare coverage, and estate planning.
2. Help stick to a budget
A financial planner can help seniors develop a budget and stick to it. By working with a financial planner, seniors can take control of their finances and enjoy a more secure retirement.
3. Protection of assets
By working with a financial planner, seniors can ensure that their financial needs are met and that their assets are protected. They can also help seniors to make the most of their financial resources and to avoid financial scams. In addition, financial planners can provide guidance on how to deal with unexpected medical expenses or changes in income.
Final thoughts
Managing your elderly parent’s finances can be a daunting but essential task. By having conversations, sharing resources, helping them make a budget, and knowing what to look for, you can help your parents navigate their finances in their later years. Additionally, you may also seek help from a qualified financial expert to handle their finances.
We hope that this article has provided you with some insights into how to help manage your elderly parent’s finances. If you need any further assistance, please feel free to reach out to us. In the meantime, have a look at some of our related articles:
- How Bridge Loan Works in Senior Living
- Key ways to prevent phishing and vishing scams for seniors
- Benefits of Advance Directives for Seniors
FAQs
- What are the financial needs of an older person?
The financial needs of an older person can vary greatly depending on their individual circumstances. However, some of the most common needs include assistance with living expenses or downsizing costs, healthcare costs, and long-term care. Older adults may also require additional money for things like food, clothing, and transportation.
- Am I obligated to financially support my parents?
The decision to financially support one’s parents ultimately depends on each individual’s personal circumstances. However, in the USA, financially capable children are obligated to bear specific costs of their elderly parents, but in some states, there is no such obligation. So, the answer varies depending on different states.
- When should you take over aging parents’ finances?
The decision of when to take over aging parents’ finances will be based on a variety of factors specific to each situation. However, some signs include if they are struggling to pay bills on time, are unable to manage their own finances, or are experiencing health issues that make it difficult for them to manage their money. If you are concerned that your parents may not be able to handle their finances safely and effectively, it is important to talk with them about your concerns and explore options for helping them.
- How can I best protect my elderly parents’ money?
There are a few different ways that you can help protect your elderly parents’ money. One of the most important is keeping track of their finances and ensuring that only authorized people have access to their accounts. Also, you can create a living will or set up a trust. This will help ensure their money goes to the right people after passing away. Finally, you can talk to your parents about using safe investment options, such as CDs or annuities, to protect their money.
- Is there such thing as a free financial advisor?
Yes, there is a thing as a free financial advisor. However, the term “free” can be misleading, as these advisors typically charge for their services in other ways, such as through commissions on the products they sell. Some financial advisors offer free financial advice on a pro bono basis as a way to give back to the community.
- What is the difference between a financial planner and a financial advisor?
A financial planner helps you plan your finances, while a financial advisor gives you advice on what to do with your finances. A financial advisor is a broader term, while a financial planner helps plan and meet your long-term financial goals.
