Your parents likely taught you all about money, helped you open your first bank account, and gave you an allowance. Sadly, over time, these roles frequently reverse themselves.
Many of us in our 40s and 50s find ourselves in the position that we must help our aging parents manage their money.
This can be awkward and difficult in some circumstances, but there are things that can be done to make the transition easier.
The Effect of Ageing on Managing Finances
As with many other aspects of life, age may eventually impact an individual's capacity to manage their finances and make wise decisions. A change in cognitive ability or even relatively minor health issues can have challenging consequences for handling money.
It’s common for spouses to divide tasks over time. Perhaps one pays the bills while the other manages the investment accounts. This can be fine while both are still living, but ultimately, the surviving spouse will be left with additional responsibilities that they’re not accustomed to. Errors can be made, especially in times of grief.
Where to Begin
1. Insurance. While there are many issues to address, health insurance and long-term care coverage is critical. While never inexpensive, the likelihood of needing it at some point is quite high in older individuals. Ensure the necessary insurance coverage is in place but is also manageable. Perhaps it is time to consider a higher excess to reduce the cost of the cover. Be sure the cover is in place when it is needed, rather than the policy being cancelled due to cost when it is needed.
When you think of "risk management," you might conjure up images of investment portfolios or sophisticated business models. What many fail to realize is they are utilizing the same risk management tools and concepts when protecting their own interests and assets.
Any insurance policy you currently own is a form of risk management. You are providing the insurance company with monetary compensation, also known as a premium.
In exchange, you are transferring the cost of any significant potential loss to an insurance company. The word "significant" is the key, because it doesn't make sense to practice risk management to protect against a $25 loss.
Insurance is reasonable for protecting against a significant loss. Life insurance is a good example. The primary income earner in a household should have a life insurance policy. In the event an untimely death would be a significant financial loss, that income would be challenging to replace.
Monthly premiums serve the purpose of ensuring replacement income and the reduction or elimination of financial hardship. The same idea applies to other forms of insurance.
Consider these insurance benefits in your personal risk management:
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Life insurance is critical for your family's financial security. However, in today's financial climate, it's smart to optimise budget expenditures whenever you can. If you want to reduce the amount of money you spend on life insurance, consider the following points.
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