How to help ageing parents with their investments?

Talking about finances, investment and wealth management with your parents, who are getting older day by day, is the most challenging part to crack. But according to experts like Brent Neiser, a certified financial planner, "The earlier you start the conversation with your parents about financial and retirement planning, wealth generation, investments, etc., the better it will be for them as well as you in the upcoming future."

As your parents start growing old now, it's your moral responsibility to ensure that they have a stable and sustainable future with the right finances, lifelong covers, right retirement plan, etc.

If you are still thinking or figuring out how can you help them and ensure the right things are in place, then don't worry; below are a few steps that can help you manage their finances and investments:

1. Preparing for the conversation

This is the hardest part to crack and thus needs to be tackled very seriously and with patience. Try to understand what and how they feel talking about investment, retirement and financial planning. You should also try to clear your intention of helping them so that they can feel a sense of security and independence and not consider you as someone who is trying to overtake all of their accumulated wealth.

It is rightly said that as one becomes older, they turn into a child, and thus aged parents need to be handled with great care else you may end up hurting them. It is always best to talk with them where they enjoy being the most. It can be a nearby garden, their favourite restaurant, etc. 

2. What to ask your parents about

After you have cracked step 1, now its time to ask questions which will indicate their current financial condition like monthly income and expenses, financial health, wealth accumulated, retirement and life cover plans and other key details.

Neiser recommends asking the following questions:

1. What kind of investment have they made?
2. What is the current status of it?
3. Do they have made the investment through various brokers, or is it only one?
4. What kind of accounts are they using (joint, individual, etc.)?
5. Do they have taken a lifelong insurance plan?
6. What kind of risks are covered in it, and what's the sum assured?
7. Do they have made retirement plans?
8. Do they have hired any third party to manage their investment and finances?
9. Do they have invested in Public Provident Fund (PPF) and National Pension Scheme (NPS)?

By the answers to the above question, most things will be cleared, and now you will be able to take some firm steps if required to maintain the stability and sustainability for their plans and accumulated wealth.

But if that's not the case, still don't worry. If they aren't able to answer any or all of these questions, you can get an idea by looking at their tax filing and other financial steps.

3. How you can help your parents with their investments

There are various ways through which you can help your ageing parents shore their finances and ensure a bright financial journey ahead.

A. Start managing their monthly expenses:

You can take care of their monthly bills like electricity, water, credit cards, loan EMIs or instalments, etc. Often there are high chances that they might have missed paying one of them and then end up paying more due to penalty. You can also automate paying all of these bills from their bank account, so managing finances and record-keeping of expenditure will also become more manageable.

Also Read: Saral Jeevan Bima

B. Alert them about financial scams:

With new-age technology booming rapidly, fraudsters are targeting old age people who are newly adopting online banking, e-wallets, debit cards, etc. Thus, you must ensure that your parents have sound knowledge of banking-related technologies.

C. Tidy up financial accounts:

Ensure that your parents don't have many accounts as it will create a great mess managing all the finances. Close all the unnecessary ones and ensure all the required ones are appropriately managed.

Also Read: Portfolio Rebalancing

D. Make a financial power of attorney:

It is essential to have power of attorney made and nominate all those who should be included in it as some unwanted situations may arise like sudden hospitalisation, unnatural death, mental disorder, etc. It can also be helpful when they might undergo severe hospitalisation; in this case, managing finances and other expenditures is critical and necessary.

E. Check for retirement and insurance plans:

As both insurance and retirement plans are critical, it should be ensured that your parents have the right plans for their stable life after retirement. If we talk about insurance plans, you must look over the sum insured and what things are covered and what isn't. If the sum insured is less, suitable measures need to be taken. PPF and NPS accounts should be looked upon if we talk about retirement plans.

Also Read: PPF Account(s)

4. Make sure investments align with your parent's goals

Most of the experts and financial planners follow a simple thumb rule of "100 - your age". This rule says that your portfolio shouldn't have more percentage of investment in equity than this. This means that if your parents are at the age of 60, they shouldn't have more than 40% of their portfolio invested in equity. But as your parents are old and now they can't understand much of finance, it's your responsibility to check their investment portfolio and ensure that their investments align with their age and goals. Mutual funds, bonds, etc., can be excellent alternatives for the same as these investment instruments will help reduce their financial risks and ensure a significant amount of returns.

Also Read: Investment products for retirement

5. Call in an expert

You can take advice from a certified financial planner to help your parents with investment strategies, retirement and financial plans, wealth management, etc. 

Also Read: Retirement Planning Blunders

Bottom Line

True, it is tough to initiate and crack the conversation about retirement plans, finances, investments, etc., with your ageing parents. Still, the earlier you start, the easier it will be. You can take various measures to help your parents in managing their finances.