Talking to your ageing parents about money isn't always easy. Many people feel uncomfortable discussing their finances, especially with their children. They might see it as a reversal of roles and they may not want to open up about their specific financial situation. However, it's important to have honest conversations about money as your parents get older. Today we're sharing our top finance tips for older people.
Financial security is something we all aspire to have and to see our loved ones enjoy. However, according to a study by the Financial Conduct Authority, about 15 million people have no pension savings. This means that one in three retirees within the UK will have to rely completely on a state pension after they retire. The key is to be patient and honest.
Money Advice for Older People
The current state pension sits at £179.60 per week. Without an additional private pension or life savings, elderly people could struggle to make ends meet throughout their retirement. These facts may seem bleak, but there are simple and effective finance tips that can help older people start planning for retirement early.
Remember, it's never too late to start planning, even if you're already approaching retirement.
1. Save Save Save!
This is a no-brainer! If you save and encourage your family to save, then there will be more money to enjoy when you really need it. We know that saving certainly is easier said than done. After all, things break, bills have to be paid and 'rainy days' often come around sooner than we expect. Nevertheless, as one well-known supermarket brand says, "every little helps." Popping a little bit of money away every week or month will quickly add up and make a huge difference when it comes to retirement. Here are some helpful finance tips on how to cut your costs and boost your saving power:
- Budget - Make sure you're aware of upcoming costs. If you know what you need to spend, you'll know what's left to save and this will make budgeting much easier.
- Look for deals and discounts - Most retailers (online and in-store) have regular sales, discount codes and deals. Simply searching "voucher code" on any well-known search engine could save you money!
- Drink more water - Water has loads of health benefits, but it can also stop you spending money on fizzy or hot drinks and even help you eat less. Having a glass of water before each meal helps you feel fuller for longer.
- Research - Websites such as the Money Saving Expert offer lots of regular tips including the latest money-saving deals. Be sure to stay up to date!
- Buy used - Don't be afraid to buy things second-hand, ex-display or pre-owned. Not everyone gets rid of things because they're broken - don't let yourself miss out on a bargain!
It's also worth looking into benefits for the elderly. Even before you reach State Pension age, you could claim things like free or discounted travel, free eye tests and dental care, discounted senior tickets, disability living allowance and more.
Bills are a necessary evil. They're no one's favourite topic, but they can pose a particular challenge to older people. Many retirees live on a fixed income e.g. the State Pension. If bills fluctuate, it can be difficult to find extra cash. Therefore, it's essential to shop around for the best possible deals when it comes to household bills. It may be difficult for an elderly loved one to haggle or scour the internet for the best deals, so try to make sure you're there to help and, if necessary, make a call or two for them.
Remember - no matter which provider you choose to use, the service you're receiving is more than likely going to be the same. When it comes down to it, electricity and water all come from the same place; the main difference will be the customer service you receive. Don't be fooled by companies claiming they have something extra special.
Take a look at price comparison sites, which make it easy to compare tariffs. Money Saving Expert is a great place to find hints and tips and is regularly updated with good deals.
Start a Pension
In layman's terms, a pension is simply a pot of money that you put away for later life. Most people are entitled to a State Pension once they reach the State Pension age, but many people also have a personal or workplace pension. As we mentioned earlier, the state pension currently stands at under £200 per week. This adds up to £9,110.40 per year.) In order to live more comfortably, older people will need to think about other sources of income.
People who are still working have one less thing to worry about, as they will automatically be enrolled into a workplace pension scheme. By law, your employer must offer a pension scheme and make contributions if you are older than 22 and earn at least £10,000 per year.
Another great option is to open a private pension. This is a lot like a workplace pension, except it's opened by the individual rather than their employer. Here are some benefits of a private pension:
- You can set up regular contributions (e.g. monthly or quarterly) or make one-off payments.
- You can have a private pension alongside a workplace pension.
- Other people can contribute to a private pension too. For example, you could contribute to a loved one's pension.
- Both private pensions and workplace pensions include tax relief. This means you'll only pay tax on contributions above the annual allowance of £40,000.
Investing money carries a higher risk than your standard savings account but it can offer huge benefits. An investment can offer a lump sum when it comes to retirement or a steady income throughout. Savings accounts offer security and ease of access, but the returns can be small. In fact the rate of interest will usually be lower than the rate of inflation, meaning that your savings will gradually decrease in value in real terms. On the other hand, investments can offer a larger return but with no guarantees and much higher risk. Here are some things to remember:
- Risk - With every investment comes some risk. The bigger the risk, the bigger the potential reward. Having your money is a savings account is the safest way to protect your funds, but interest rates are typically lower than inflation so don't bring much return. In general, you shouldn't invest money that you can't afford to lose.
- Consider mixing investments - Generally, different asset classes don't do well all at the same time. If you invest in a selection there is a higher chance you'll always have one investment doing well. This reduces the risk of your overall investments doing badly.
One of the best finance tips we can give you is to plan ahead. While none of us can predict the future, we can definitely make careful plans for the year to come. Talk to your parents about what they want to happen as they get older. For example, if they could no longer live at home by themselves, where would they want to live? Have they made a will? Do they have any money set aside to pay for any care they may need?
These can be tricky conversations to have, but it's essential to talk openly and honestly with your parents. Here are the most important topics to cover:
A power of attorney is a legal document that allows someone else to make important decisions on your behalf. You should talk to your parents about who they want to act as their attorney if they became unable to make certain decisions themselves. This could be on a temporary basis; for example, if they were in hospital and needed someone to pay rent or bills on their behalf. Alternatively, it could be a long-term solution for somebody who loses mental capacity due to a condition like dementia.
To learn more, read Plan Ahead: Power of Attorney
Creating a will is just as important as arranging power of attorney. A will is a legal document that determines who will inherit your possessions and assets after you die, as well as who will look after any dependent children in your care. According to research by Royal London, a shocking 54% of adults in the UK have not made a will.
Setting up a will doesn't have to be a complicated process. You can choose to write your own will, although this is not advisable unless your finances are very simple. Alternatively, you can use a solicitor or a will-writing service. Solicitors tend to be the most expensive option, but they're worth considering if you have a complicated estate. This might be because you have children from a previous marriage, for example, or one or more properties worth lots of money. For most people, a will-writing service is perfectly suitable; it's cheaper than using a solicitor and more reliable than writing the will yourself.
Prepare for the Worst
Talking about funerals with your loved one can be an uncomfortable and depressing affair. Still, it's something you should discuss with your loved ones in advance. You should find out what kind of funeral your parents would want and whether they've set aside any money to pay for it already. According to SunLife's Cost of Dying Report 2021, the average cost of a UK funeral is £4,184. Costs to bear in mind include funeral director fees, local authority fees and any extra costs such as the burial or cremation, cemetery plot, ceremony, and wake.
It's usually the person or people arranging the funeral who have the responsibility of covering the cost of it, but that's not to say that there aren't other financial resources available. If your loved one has funds in their estate, their funeral expenses can be claimed back from this and some funeral directors will allow payment to be delayed until your loved one's estate has been unfrozen and divided.
If you receive certain benefits, you could be eligible for a funeral expenses payment to help cover certain costs. The payment won't usually cover the cost of the entire funeral, but it can be a massive help.
Insurance is Key
As a child or grandchild, one of the most important finance tips to share with your elderly relatives is life insurance. Not everybody needs a life insurance policy. However, anyone who has a partner, children, or other relatives who depend on their income should probably take out insurance. Life insurance will help provide for your family if the worst happens. The policy will release a sum of money upon the person's death, which the family can then use to pay the mortgage, cover funeral costs, and pay for general costs of living.
The cost of life insurance varies, depending on several different factors such as age, health, lifestyle choices, policy length and the amount of money that is being covered. Behaviours like smoking or dangerous job roles will increase the premium. Life insurance is cheaper for younger and healthier people, so it's better to get it sorted sooner, rather than later!
If you decide to take out life insurance, it's important to look around for the best policies. When taking out a new policy, a general recommendation is to cover around 10 times the annual income of the highest earner in the household.
Careline Alarms - A Top Finance Tip
One of the best finance tips that we can offer you would be to consider a Careline Alarm for your loved ones, especially if they live alone or suffer from long-term health conditions. As your parents or grandparents age, they may begin to struggle with everyday activities and the day might come where they have a fall a health scare. If and when an emergency happens, a Careline alarm ensures that they can always call for help.
Our service is far more affordable than moving into care. Most importantly, it allows your loved ones to carry on living in the comfort of their own home. One push of a button will alert our 24-Hour Care Team, who will respond immediately and send help to your loved one's home. The alarm user will be able to choose up to six emergency contacts to be called in the event of an emergency. The Care Team will also call the emergency services if they're needed.
Our alarms ensure that there is always help available, day or night. For more information about our service, please call 0800 101 3333, or complete our contact us form and a member of the team will be in touch shortly.
Note: we updated this article on 24/06/21 to include the latest information.
Originally published 17/05/18