The Federal Consumer Financial Protection Bureau recently issued a report expressing concern about the use of misleading "senior designations" by some financial professionals. The report reminded me of how easy it is for seniors to get in over their heads where money is concerned.
My own mom is 78, widowed and slowing down. As I have helped with her finances, I have learned you can't assume your folks have a handle on their bills or even that they are debt-free.
Seniors and credit card debt
You may think seniors are past the credit card stage, but a study conducted by the AARP Public Policy Institute and Demos indicates otherwise. According to their survey, older households have credit card balances that averaged out to $8,278 in 2012. Meanwhile, those younger than age 50 had average credit card debt of only $6,258.
For a third of those who are older than age 50, their credit card debt is related to basic living expenses and half have medical expenses charged to their credit card. Nearly one in four is in debt because they wanted to help family members financially.
Helping your parents manage credit cards
Stepping in to help your aging parents clean up credit card debt requires sensitivity. You simply can't swoop in and take over their finances.
Unless your parents have severe dementia, you need to respect their wishes. In addition, never fail to do everything possible to preserve your parents' dignity. For many seniors, it can be difficult and humbling to ask for help from adult children. Look for ways to gently broach the subject of money management.
- Use life events: There may be times when your parent is in transition, and a natural opening to offer help appears. After the death of my dad, for example, there was an opportunity for me to ask if I could help mom with her finances. Another example may be when a parent is starting Social Security and feeling overwhelmed with the prospect of creating a new budget and navigating Medicare choices.
- Ask them to help you: Start a conversation by asking your parents to help you plan for their future. When it comes to long-term care, if your parents mention they don't know how to pay, that might be your segue into learning more about what debt they carry and if they are in over their heads.
- Watch for clues: While I would never advocate snooping, keep your eyes open for signs of financial trouble. Are there unopened bills on the table or does your parent appear to avoid answering the phone? Both could be signs of accounts in collections. At my 80 year old aunt's house, it was the enormous stacks of magazines -- for head-scratching titles such as Early Parenting -- that led to the revelation she been bullied by telemarketers into buying dozens of subscriptions.
- Introduce other options: If your parent likes the convenience of plastic but tends to overspend, consider suggesting a prepaid card to replace their debit or credit card. You can also look for balance transfer offers and propose your parents consolidate their debt on a low interest credit card.
Whichever method you chose, remember not to demand and not to lecture. Unless you think your parent is a victim of fraud, it is best not to be too pushy. If your parent is resistant, back off and try again later.
Credit cards can be a great financial tool, but it can be easy for seniors on a limited income to quickly get in over their head. As your parents age, keep your eyes open for signs of trouble and don't be afraid to offer your help. It can be the least you do to repay all they have done for you.