How to prevent aging parents from spending too much money

As your parents get older, they may show signs of cognitive decline that present challenges. One of the most difficult conversations to navigate can be if your parents are making poor money decisions. After all, it's their money, and they have a right to spend it how they want. However, overspending on a fixed income can lead to serious financial consequences. Here, we explore how to identify signs that your parent is overspending and how you can implement strategies to discourage them from doing so.

Signs your aging parent is spending too much money

It can be difficult to differentiate problem spending from the occasional splurge. You may not have much insight into their finances, so identifying the line when purchases have become excessive may be complicated. Nonetheless, there are some key things to monitor.

Unusual spending patterns

Even if you haven't lived with a parent in some time, you probably have some idea of their spending patterns. A lifelong shopaholic parent may still show signs of unusual spending. If you notice sudden and frequent uncharacteristic purchases, like large donations to charities or lavish gifts to friends and family, it may be an indicator that your parent is not thinking critically about how they spend.

Financial red flags

Pay attention to your older parents' mail. If they're getting notices for failing to pay bills or falling behind on credit card payments, it's a sign that they may need help managing their finances. Difficulty paying bills can lead to compounding financial issues, so it's important to address debt as soon as possible.

Be a financially smart family!

Be a financially smart family!

From saving for the future to understanding credit, see how families are thriving with Greenlight.

Try Greenlight today

Emotional spending triggers

Many older adults use spending as a means to create connections or draw closer to friends or family. If you notice signs of loneliness, boredom, or depression, they may lead to overspending, so it's important to take note if a recently widowed or solitary parent suddenly begins sending gifts or shopping online a lot.

Becoming a target of scams

Unfortunately, financial abuse of older adults is a far too common problem in our society. Older people who live alone are especially susceptible to fraud or manipulative sales tactics. If your aging parent has been victimized by a scam more than once, it may be time to discuss taking over their finances.

Talking to your parents about spending too much money

It's never easy to tell your parents you're concerned about their ability to take care of themselves. For many families, however, it's important to do so if a parent's spending has become problematic. To do it effectively, try following this blueprint:

1. Start with empathy and understanding: Any conversation about your aging parents' autonomy should be approached with love and respect to avoid conflict. Remember, they're your parents, and you must speak to them like adults, not children.

2. Use examples and facts: Frame the conversation through objective facts, not opinion. Gently present evidence of overspending to make the case clearer.

3. Address their fears and concerns: It's natural to feel frightened when realizing age may be leading your parents to make poor financial decisions. They may also feel concerned that they won't have access to their hard-earned money if you take a greater role in managing it. Help them understand how financial stability will ensure their independence and security, and assure them that you're not there to make their life more difficult, just as a safeguard to protect that independence.

4. Seek external support if necessary: If you don't feel confident managing their finances or if you're unsure how to have the overspending conversation with a parent, consider bringing in a financial advisor or other neutral third-party professional to make the experience less emotional and more grounded in practicality.

A common rule that many families observe is the 40-70 rule. This rule suggests that when you turn 40 or your parent turns 70, it's time to begin having conversations about legal and financial planning. By having these conversations early, it can make heavier conversations about taking over management of your aging loved ones' finances much easier to do.

Tips and strategies for helping aging parents manage their money

Having the conversation and helping your aging parents understand that they're spending too much money is, in many cases, the most difficult part of the process. Sometimes, they'll only reluctantly accept the idea that they're overspending. They may resist making significant changes to how they spend money or giving you greater control over their finances. Every situation is different, but let's explore some tips and strategies you can implement to help your aging parents better manage their money.

Create a collaborative budget

Many families create a budget every month to spend within their means and make sure they meet all of their financial responsibilities. If your parents are overspending, there's a good chance that they've either stopped balancing a budget or just felt like they didn't need one anymore. But creating and sticking to a budget is one of the most effective ways to manage your money.

Work together to establish a monthly spending plan that meets your parents' needs. Make sure that it accurately represents all of their income from retirement plans, pensions, and any other fixed income streams. A good budget should provide for living expenses like groceries, gas, medicine, and other essentials, as well as occasional luxuries like dining out and entertainment.

Monitor accounts with permissions

Some parents may simply need a conversation to take their overspending to heart. Others, especially if they're experiencing dementia or cognitive decline, may need more active management of their finances.

Simplify their finances

In some cases, aging parents may struggle with financial management simply because their finances are too complicated. They have money in too many accounts, too many active credit cards, and have to pay bills in many different ways. Work with them to simplify their finances by consolidating bank accounts, setting up automated bill payments, and limiting their access to credit cards.

Address potential mental health or cognitive issues

Overspending can be a sign of more severe issues. If you're frequently having the same conversations about overspending or notice your parents struggling with memory loss, forgetting names, or missing appointments, it may be time to seek a doctor's evaluation. 

Secure finances against fraud

One of the best safeguards against fraud is simply education. Spend some time with your parents to talk with them about common scams and tricks that fraudsters play via email, phone, or text. It's also a good idea to work with their financial institutions to set up security features like alerts and credit freezes for suspicious activity.

Set boundaries and involve siblings

Helping your aging parents manage their finances doesn't have to fall just on you. It's important to collaborate with other family members to share responsibilities and avoid misunderstandings.. It's always best to be as transparent as possible when working with your parents about their finances.

Consider a power of attorney

If your parents are no longer able to manage their finances independently, it may be time to consider a power of attorney. This legal designation allows you to take over the fiduciary responsibility of your parents' finances and legal decisions. Some parents may set up a power of attorney with an adult child with certain stipulations for financial management before they begin experiencing signs of cognitive decline.

FAQs

What is the 40-70 rule for aging parents?

The 40-70 rule suggests that when you turn 40 or your parents reach 70, you should begin to prepare for the challenges of aging. This means having proactive conversations about financial and legal planning in the event that they become unable to manage their money or make decisions for themselves.

How do you stop someone with dementia from spending money?

There are a number of ways to keep an aging parent with dementia from overspending or spending on things they don't need. You can set up automated payments with their financial institutions for bills and other regular expenses like utilities, monitor their spending with tools like Greenlight Family Shield, or manage their finances by filing for power of attorney.