While statistics are hard to come by, anecdotal evidence suggests that a growing number of aging Canadians are turning to their adult children for
There are myriad reasons why it might be happening, ranging from investment and spending miscues to addiction issues or perhaps the onset of age-related conditions that make sound money management increasingly problematic. It’s a worrisome enough trend that the credit-monitoring company Equifax reported that the delinquency rate for seniors was up four per cent last year, the highest of any demographic.
Most parents don’t want to be a burden to their children, and, with early and effective intervention, they may not have to be. Sheila Walkington, co-founder of Money Coaches Canada in Vancouver, provides us with a list of tips for adult children to consider when fielding calls for help. And while it certainly might be the case that adult children are compelled to provide financial assistance — if they can afford to — it should be the last option, not the first.
1. Talk first.
When an aging parent reaches out for financial aid, it’s best to have “the conversation” before reaching for the chequebook. “Make sure they’re comfortable and that you’re not judging them,” advises Walkington. “Let them know you’re there to help but not necessarily financially.”
2. Bring in a professional.
If the conversation is too difficult, consider bringing in an impartial third party in the form of a professional money coach or accountant.
3. Get out the calculator.
Start by examining the numbers: what’s the income, what’s the outflow? Carrying a credit card balance is a big red flag that debt is out of control.
4. Consider debt consolidation.
If your parents have equity in their home, it can be used to convert high-interest credit cards into low interest debt using tools such as home equity lines of credit or reverse mortgages.
5. Consider downsizing.
Downsizing may be the best option. As a rule, it’s always better to downsize and settle before you have to. “It’s easier at 78 than 88,” says Walkington.
6. Examine spending.
Many Canadians, old and young, shop inefficiently, especially when it comes to food. Provide advice; there are lots of tips and tricks on the web. Eliminate unnecessary expenses such as pricey phone plans; pay-as-you-go plans are great for casual users.
7. Review life insurance policy.
“If the kids are out and doing okay they probably don’t need it at all, but understand the ramifications before cancelling,” says Walkington.
Some older Canadians with RRSPs will plunder them inefficiently before signalling that they’re in financial trouble. This can trigger punishing and often unanticipated tax implications that exacerbate the problem. Ensure savings are rolled out in a tax efficient way.
8. Examine investment portfolios.
It should make sense for the individual and, as they age, it may include moving savings into safe bets like bonds and GICs.
9. Be cognizant of mental health issues.
If conditions like dementia are an issue, it might be time to consider obtaining power of attorney and taking a more active hand in managing day-to-day financial affairs. Do this in consultation with siblings and parents’ professional advisers.
10. Keep an eye on the bank.
Older Canadians are frequently preyed upon by scam artists. Having online access to bank accounts provides the opportunity to take action without waiting for statements to come. According to Walkington, reputable banks are “very good” at working with customers on, say, reversing questionable credit card charges if reported quickly.
11. If all else fails, consider bankruptcy.
Most of us are ashamed of the concept, but it eliminates unsecured debt, stops collection agents, ends wage garnishments and gives one a fresh start toward financial recovery.