It’s a funny feeling the day that you realize your parents might be in a money mess.
Remember that cup of coffee that your Mum or Dad used to shout you? Well you’re now paying for it.
Not that you really mind, it’s just that as a kid your parents seemed to have everything together and nowadays you’re worrying a lot more about their money situation.
The problem is that an increasing number of baby boomers are now asset rich but cash poor.
This is because Australia experienced 20 years of rising property prices and economic growth, but what’s also happened is that the cost of living has increased and as people live longer they are running out of money to support themselves.
While there is the government pension to fall back on, $880 for singles or $1340 for couples per fortnight, is not a lot to live off, especially if you need to afford accommodation.
One sad fact is that women are more likely then men to struggle as they age and end up in poverty, according to a new study released last week.
For Generation X and Y, this means it’s time to step up to the plate on money matters.
“We don’t like to think about it, but as our parents age and often their health and memory deteriorates in the process, the responsibility to handle financial matters on their behalf most often falls to their children,” says Natasha Janssens founder of Women with Cents.
Natasha recommends striking up a dinner table conversation about money sooner rather than later.
“These are not the most fun conversations to have but they make life so much easier for all concerned if everyone is on the same page.”
Key points to talk about include:
- What is happening at the moment with income, expenses and debt?
- Do they have an enduring power of attorney?
- What are your wishes for medical care?
- What assets do they have?
- Where is the Will?
- Who do they want to inherit what?
Sarah Riegelhuth financial planner from Wealth Enhancers says if money is tight, her advice is to forget your inheritance!
“For the most part I think Gen Y should be able to create their own financial freedom, and it’d be nice tell their parents not to worry about inheritances or anything like that. Spend and enjoy your money while you’re alive.
“My parents for all of their working lives had cash flow, but lived week-to-week and as a result are fairly asset poor. I’ve managed to strike a good balance between enjoying a great lifestyle now, and saving for the future.
“I had to learn this myself as I was never really taught about budgeting, investing or saving in any great detail,” she said.
If Generation X and Y can learn one money lesson from the Baby Boomers about money it’s their tendency to live within their means.
“I think Gen Y have a great opportunity to build wealth as we’re for the most part earning high incomes, due to Australia’s relatively high minimum wage level, and many of us have managed to stay at home for longer.
“But many of us are simply in a habit of spending more than we earn and living the high life well before we should.
“In my experience baby boomers understood the concept of delayed gratification and starting early far better than we do,” says Sarah.