Helping Your Parent Set Guardrails for Safe Financial Independence

Finding balance as a financial caregiver for your loved ones can feel tricky. On one hand, you’d like to offer your aging parent as much autonomy over their money as possible; on the other hand, protecting their assets is essential.

Unfortunately, seniors are quite vulnerable to financial scams. In fact, older individuals lose $3 billion dollars each year from financial exploitation, according to Consumer Affairs, with those over the age of 80 being hit with the highest financial losses. 

Keep Losses to a Minimum

Financial exploitation can occur when someone close to a senior takes advantage of cognitive decline. 

I recently worked with a family that had concerns their mother had trusted the wrong people in her life. While the family believed these unsavory characters were stealing from her, their mother was very defensive of her “friends,” and wanted to help them with monetary gifts.  

The money belonged to this woman and in most cases, the money does belong to the senior and they should be allowed to spend as they choose - to a certain degree. 

The key is to be willing to let go of a relatively small amount of money. That may be $50 or it may be $500 depending on the senior’s assets. Just as you might enter a casino planning to gamble with only a small amount of money, designate an amount that the senior can spend however they choose -  even if you disagree with the choice.

Something as simple as this can help the senior retain a sense of dignity regarding their finances, without putting them at a big risk.

Creative Problem Solving

I had a client who would routinely take out large amounts of cash, upwards of $2,000, because she felt a sense of comfort by having a lot of cash on hand.

The problem was that she was unsure of where she put the money, and no one could find it. Sadly, I suspect a caregiver was taking it from her. 

As a solution, I gave her small amounts of money, $50 in small bills, so she physically had a wad of cash to hold.  Later her nursing home gave her play money to satisfy her need for cash. 

This helped her to feel secure and calmed her agitation.

First Things First, Make it a Discussion 

Keeping an open line of communication should always be the first strategy whenever possible. Maybe Mom knows that she is more vulnerable to fraud as a senior. Or Dad knows that his memory is beginning to slip. 

They don’t actually want to lose all their money, so they may be willing to accept some safeguards, if you explain your reasoning.

For example, a credit card with a $25,000 limit has the potential for problems, so I often recommend switching to a True Link card. This is a reloadable debit card that operates similarly to a credit card, but allows you to set limits on both transaction amounts and on where the card can be used. 

I often remind families there may indeed be mistakes made with money by the senior, but the key is to let those mistakes be small, rather than large, losses. The last thing you want to do is control too tightly. This can cause resentment and a lack of trust.

If the senior is truly incapable of managing any of their money, more extensive measures may need to be taken. 

If no one has been appointed as power of attorney and the senior is no longer able to execute legal documents, the next option may be to pursue guardianship. Before making that leap, it may be useful to take advantage of our Financial Caregiver Action Plans to discuss strategies for your family’s unique situation.