Are Finances a Family Affair?

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Are Finances a Family Affair?

by Allen Unrau

When you were growing up you always assumed that your parents had money. You probably weren’t sure how much they were worth or where they kept it but you were pretty certain there was a stache for a rainy day somewhere.

They must have been able to save a fair amount because every once in a while your Dad would come home with a new car. He despised credit or any other type of loan so it must have been a cash sale – and a toughly negotiated one at that!

Have they saved enough to get them through their retirement years safely? Did they get hurt by any of the disasters in the stock market lately? Has the cost of living gone up so much that a good retirement savings plan started twenty years ago looks pretty pathetic right now? Maybe they don’t really know what to do about their financial situation as they age.

Code of Secrecy
Most families have a “code of secrecy” about mom and dad’s money. Nobody wants to discuss financial affairs because it might upset or embarrass their parents. Why don’t seniors talk openly about bills, savings plans and account balances to their families? It seems to be an unspoken rule in our society to keep these things private.

Until it’s too late – and then everybody panics.

“We had no idea that Mom and Dad were actually struggling with their retirement bills and didn’t have much money to spare,” says Marty. “They haven’t had a mortgage for as long as I can remember so I just assumed they were doing OK. I expected they had some savings somewhere.”

“They never had a habit of spending excess money on themselves so we didn’t suspect they were running short. The only clue that should have alerted us to some financial problems was the lack of Christmas presents for everyone last year. Usually if they were going to “go overboard” (in their terms) that was the time they would do it. Last year we didn’t see their usual pattern of generosity.”

So, What Happened?
Marty’s father had done a good job providing for his family as they were growing up. Harold and Elsie had scrimped and saved to pay their home off within ten years of building it. Any extra savings had gone into ultra conservative investments that were government guaranteed. When Harold left his job with the railway, he was sure that his retirement would be secure with the savings and pensions they had.

Then he met Mr. Davidson: Thomas Davidson called Harold a few years ago and asked if they could meet and discuss his retirement income. He indicated that several of Harold’s fellow workers from the railway company had “modified” their investment plans and some of them had actually doubled their retirement income. Would Harold be interested in talking about something like this? Of course...anyone would at least take the time to hear the story. (Especially if his former co-workers were doing so well.)

As it turned out, Tom Davidson convinced Harold to switch a large part of his retirement savings to a “high growth – high return” plan. This new plan did very well for six months and Harold was pleased with himself for finally “taking a chance” with his investment. (He had always been ultra conservative.)

Then the bottom fell out and the fat monthly cheques stopped coming. Harold was stunned. The biggest part of his life savings was now gone and all he could do was “blame it on the market.”

He was too embarrassed to tell his family about the mess they were in so grandpa and grandma suffered in silence, all the while trying to put on a brave face....

Something is Wrong
As time went by son Marty and daughter Peggy sensed that something was very wrong in mom and dad’s life. They decided to take a chance and ask some questions about money. They both agreed in advance that their parents’dignity would be preserved at all costs, no matter what! They loved their parents deeply and didn’t want to hurt their feelings in any way.

When Harold finally opened up to his children, it became very clear that they were “house rich” and “cash poor.” Taxes, insurance and maintenance costs were eating up the income from the savings they had left so they were actually living strictly off their old age pensions.

There were some tears and lots of reassurance from the adult children about their love and respect for mom and dad no matter what had happened.

Working on Solutions
Then this family sat down and came up with a workable financial solution. The value of Harold and Elsie’s home had gone up dramatically. You’ve all heard about reverse mortgages that give you monthly income from the equity in your home. Marty and Peggy got some good advice about setting up a similar plan but keeping it all within their family. (No outsiders or big fees.)

The children arranged a mortgage with a very low interest rate that paid mom and dad a good monthly income. In the will, the home was going to the children anyway – they were just helping out now while they could, when their parents really needed the assistance.

This family came up with a “back-up plan” to preserve the parents’ dignity and protect their assets.

Does your family need to talk?

Allen Unrau writes a weekly column relating to "reallife" seniors issues in Abbotsford BC. He is actively involved as a volunteer with numerous seniors' organizations in the Fraser Valley. He is a grandfather of eight and works as a licensed realtor specializing in seniors Real Estate...helping seniors and their families with the purchase or sale of homes in the Fraser Valley.

If you are listing your property for sale in the Fraser Valley, or to request further information, please call Allen at 1-604-855-0800 or toll free at 1-866-855-0800.

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