Simplify: Your parents are no different than the majority of people who get set in their ways (including you) when it comes to finances.  Whatever worked before or was a comfortable process at the time they started continues on and on regardless of life changes.  “It ain’t broke so why fix it?!”  But, it also accumulates over the years and becomes more complicated than need be. 

For example my father had three checking accounts in three different banks and savings accounts in as many.  Before retirement he needed three, one for work, one for investments (rentals) and one for my mother to use.  He never changed after he retired.  He had friends and business clients at the three banks so he felt obliged to support them all.  Here are some ways to simplify their lives.

. Close unnecessary checking and savings accounts and consolidate in one whichever bank gives you the best service, highest rate (see work harder below) and lowest costs.  Also, be sure to have them set up with joint survivorship.

. If your parents are not on a budget plan for utilities (gas, electric, cable, etc)  I strongly recommend they convert.  Regular monthly payments are easier to manage with a fixed income and they simply record keeping.  Note: Gas companies often have a “catch-up” month in summer to balance out any run over or under of year’s payments.

Automate:  Change as many income and on-going expenses to automatic deposit and payment as possible.  Social Security probably all ready is auto deposit but what about dividends and interest?  Pension, IRA and annuity checks?   I know some older persons do not trust banks and prefer to cash income checks.  They like the security feeling of cash in hand (I knew a man who did not feel right without $600 in his wallet).  But, point out that checks can be stolen from mailboxes and thieves watch banks for people cashing large checks.  Could they fight off a purse-snatcher?  Automatic deposit is safer and secure.

Once on a budget plan for utilities have the money automatically paid from the checking account.  This will avoid missing a payment plus save postage.  Some insurance companies will allow monthly regular payments of premiums instead of large semi-annual payments.  Again, this is easier on fixed incomes (and ease your worrying about their bill paying).

WAIT WAIT! How do I keep track of all this automatic stuff without checks!!  That was the big concern for my parents.  The solution is simple.  Keep a list of all the automatic deposits and payments in the back of their checkbook register.  On the first of each month enter the whole list in the register, income then expenses.  Balance the checkbook and now you know how much cash you have to spend the remainder of the month.  This prevents the common misperception of thinking money is there because the checkbook balance starts high but not seeing their total commitments until the end of the month when they run short.  Make any adjustments from the next bank statement for changes in any auto transaction.

Make Their $’s Work Harder: 

Review their expenses (red flag here – move cautiously and do it together). 

-Are they still paying for magazines they no longer read?  Or, got “free” for a few issues and now feel obligated to pay for a subscription?

-Could raising their deductible on home & auto insurances lower their costs?

-Are they paying personal floater insurance for items they no longer own?

-Does homeowner insurance include property no longer owned?

-Is their credit card rate high?  Check for a lower rate card at Credit Union.

-Do they make donations to questionable charities?

-Club membership dues, are they still active, attend functions?  Do they gain any benefits from membership?  Or, is it renewed out of habit?  

Do their life insurance policies pay dividends?  Could these be used to pay premiums instead?  One less bill…

Investing Strategy:  I take a conservative approach to investing their money.  It’s not long-term (no more than 10 years) and makes my folks feel better about where their money is placed.  I’d feel awful if I caused them to lose any money.  See also article on seeking professional help.

Savings rates at most local banks are very low and not competitive with many of the new Internet or national banks.  Interest paying checking account rates are pitiful!  This money can be working harder elsewhere.  I moved some money from my parents’ savings into a national money market account paying 3 times the interest.  They have access to these funds through checks when needed.  I also setup an automatic monthly deduction to a national bank’s high interest savings account.

Christmas Clubs – this is a pet peeve of mine.  I remember having one as a child and thought that big check was great once a year.  But, again the rates they pay are terribly low and you have to wait until November for your money.  I finally convinced my folks to send their auto deduction each month to their money market account then write themselves a check in November for Christmas shopping.

CD rates are not great but are rising and are still better than bank savings rates.  I have “laddered” (they mature at different dates) some CD’s for my folks again with three different national banks through the Internet.  None is more that 12 months but earning slightly higher rates.  When they mature I re-invest in the best rate available for another period up to 12 months unless the money is needed. 

Diversify their investments.  If a major portion of their savings is in one stock, savings account, etc. it is a risk. (too many eggs in one basket)  I follow the general rule that not more than 10% is invested on one place.  I know this seems opposed to the simplify idea but safety is also a strong consideration.

Important Note:  ALL of these financial changes were made with my parents understanding and my siblings buy in.  Don’t do it on your own!  Respect their opinions.  And when unsure, ask for professional advice.

Check the CD maturity dates of any CDs your parents have at local banks.  Often you have only 10 days to redeem them or they automatically roll over into whatever CD the bank chooses.   Not usually the best rate either.