Planning & Budgeting

How to stop an elderly parent giving money away

· 9 min read

While some people are fantastic with money, it is often the elderly that seem to fritter away their cash. Sometimes, this has severe repercussions for their overall financial health. Here, we look at how you can stop an elderly parent from giving money away - and why you might want to do so.


Parents giving their money away: Your questions answered

  • How can I protect my elderly parents' money?

    In addition to having power of attorney put in place over their finances and legal affairs, educating your parents is also a good idea. One such key area to educate them is on the topic of phishing scams and fraud. More and more older people are subject to such scams. Fraudsters illegally steal money from unsuspecting victims. By telling them what common phishing scam tactics are, you should help protect them against it happening.

  • What to do if an older person is being taken advantage of?

    If any illegal activity has taken place, or you believe it to have taken place, it is crucial to go to the police as soon as possible. However, if you think they have been subject to online fraud, it is also a good idea to contact their banks and any other relevant financial institutions.

  • Are you legally responsible for your elderly parents?

    Legally speaking, you are not responsible for your elderly parents and not required to pay off their debts should they pass away. However, if they have debt outstanding when they die, the estate must settle those debts, which will reduce any inheritance you receive.

Talking about money is often something we all shy away from. Tradition has taught many of us that discussing finances is crass. However, that does sometimes prevent us from having open and honest conversations that are important to have. One such instance is when an elderly parent is spending their money like there is no tomorrow. That in itself is not always cause for concern. But it can be if they have a very modest pension pot or income.

Here, we look at how to stop an elderly parent giving money away or spending it too quickly. Importantly, we identify the signs to keep an eye out for that should alert you to when your parents are giving away their money. And, finally, we list why stopping a parent from giving money away is crucial. It is not about being a money-grabbing heir. It very often is for their benefit as well.

Common signs your parents are giving their money away

Below are significant indicators that your parents could be giving their money away without too much thought for the future. Not all of these signs need to be present for them to have an unhealthy approach to their budget. Just one or two can give cause for you to address their spending problem.

Large sums of leave their account

It could be that you already have access to view your parents' accounts. If that is the case, as is so often when an older person is involved, keep an eye out for any large sums of money leaving their account. Regularly or on an irregular basis. Hopefully, it will be an easily explainable transaction made for logical, necessary reasons. However, older people are at risk of fraud more than younger demographics. So, do double check that these transactions are legitimate. Additionally, it may identify if and where your parents are literally giving their money away to people. In such situations, their intentions may be good, but it doesn't always mean it's affordable or wise. 

They always pay for other relatives

When looking through bank statements, you may find out that your parents always pay money to certain relatives or people. But you can also identify instances of them always paying for certain people when out. For example, if you often go out for dinner with the same aunt or uncle or cousin, and your parents always pay for them, it could be cause for concern. It could be a particularly worrying scenario if it is coupled with regular payments from your parents account to the same individual. Obviously, there is a fine line here between being generous and unaffordably generous. However, it is a good circumstance to be aware of if you are already worried about your parents' finances.

They give lavish gifts

Finally, your parents may seem generous to others if they are consistently giving lavish gifts. However, you may know they cannot really afford to do so. This may even be the case if they are frequently giving money to charity yet are struggling financially.

Again, there is a fine line. Older people sometimes become a lot more blase about money the older they get. Often they will argue that money is not everything. However, they still need to afford to eat and put a roof over their head. So, if they are constantly giving lavish gifts they cannot afford, it could be time to broach the subject with them. If you find it particularly hard, perhaps suggest ways to buy those luxury items more prudently,

How to stop a parent giving money away

As mentioned above, talking about money is something that so many shy away from. However, it may be necessary, particularly if you have a parent who is about to blow their pension pot just a few years after starting to withdraw from it.

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There are other ways to help the situation, so you do not always need a frank chat. The following ideas can help stop an elderly parent giving money away that they cannot afford to lose.

Educate them

Perhaps the best thing that anyone can do to improve their financial health is to improve their financial literacy. The jargon surrounding financial products is intimidating at times. Bearing that in mind, educating your parents around budgeting can work wonders for them making their pension last. Until recently, they will have been used to having a regular income, so making money stretch for an undetermined amount of time may be difficult. Educating them with the aid of any online guides will be a big help. Using tools to assist in managing their finances better will also be beneficial.

Ask them for power of attorney

If you are significantly worried about your parents and their spending habits, you can ask them for power of attorney. However, you will usually need their consent. While sometimes their consent is not required, that is in very isolated instances where their mental health cannot be relied on. Plus, what you can do with power of attorney is still limited to a certain extent. It means your parents would need your approval to sign up for things like leasing a new car, for example. However, they will still be able to take money out of their account.

Seek advice from a financial advisor

In conjunction with educating your parents to help improve their financial literacy, sitting them down with a financial advisor is also a great idea. Doing so means that your parents will be walked through their specific situation. That means that the financial advisor will be able to highlight to them where their current spending habits will put them in a few years. It also means the financial advisor can say why that may mean they soon run out of funds when looking at their pension pots and investments. And, ultimately, using a third party can often diffuse any tensions. It is often the case that people will listen to a financial advisor even if they say the same thing as a well-meaning friend. For that reason, spending the cash on an hour with an IFA can quickly pay for itself.

Give them a monthly budget

Sometimes, without a regular income coming in from a salary, older people go a little off the rails as they are simply dipping into their savings to survive. The reason that that causes problems is that it is hard to budget out any lump sums. Because it looks so large, it can be easy to think, 'oh, I can afford it,' which is why your parents may be splashing out a lot.

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To help stop that from occurring, try giving them a monthly budget. Doing so can help them be a lot more frugal with their cash. Like any of us, if we know we have to make a certain amount of money stretch until the end of the month, we are less likely to blow all of it in the first week. Plus, it makes managing their money more achievable by breaking it down into smaller chunks.

Why stopping a parent giving money away is important

A great deal of the above may make you a little uncomfortable. Often, it will be because you do not want to talk to your parents about money. Doing so will flip the parent-child relationship that you have with one another. But also, there is the chance you will come off as money-grabbing. By telling a parent they are spending too much, there is an inference they are spending your inheritance.

Hopefully, you will know each other well enough that your parents will know your intentions are good, even admirable. But if you are still worried about how your actions may be misconstrued, take comfort in the following ideas. They are the reason why stopping a parent giving money away is so important.

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Their future financial health

People are living longer and longer these days. It means that pension pots have to stretch further to last until a person passes away. In that time, a person is likely to need some form of healthcare. Healthcare is increasingly more expensive. For example, after not budgeting correctly for their retirement, some have to resort to selling their home to pay for care.

Remember this if you are anxious about broaching the subject of spending with your parents. Their future financial health is dependent on their approach to their present-day finances.

Tax inefficiency

If your parents are giving their money away or spending it quickly, it could be a very inefficient way of using their pension pot. While deciding how to make withdrawals from a pension pot should always be done with professional advice, it could be that your parents are not making the most of the tax laws surrounding pensions.

Inheritance

The problem with giving vast sums of money away to people is that inheritance tax laws surround what tax is due when a person passes away. So, should your elderly parent sadly pass away, having given a lot of cash to a relative, it could be that the estate then also must pay tax on that gift.

Stopping an elderly parent giving their money away

Stopping an elderly parent from giving their money away is not all about your inheritance. Instead, getting them to understand the implications of their actions is vital. If they do not fully understand they could well run out of money before they pass away, it means they may have to dip into equity in their homes. That starts to become a slippery slope as it could mean that they may lose their house if their spending habits do not improve.

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Rachel Lee
Rachel Lee
Having worked at Morgan Stanley and BNYMellon for over 10 years in pensions and investments, Rachel naturally started to move towards investment writing more and more in her day job. Rachel now works as a full-time business and financial writer - drawing from her hands-on experience in the field.
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