Article How to budget and care for ageing parents

As life expectancy continues to rise and we enter the era of 100-year long lives, many of us might find ourselves navigating the complexities of caring for ageing parents. ¹ Have you thought about what this could mean for you? How will you balance their needs with your own financial goals?

The gift of more time hopefully means more precious moments to spend with our loved ones. But this could also bring a new reality which needs thoughtful financial planning with the wellbeing of you and your parents in mind. Diving into the costs of elderly care can be overwhelming, but like most of the challenges we face it’s a situation we can try to improve with careful planning and open communication.

In this article, we’ll cover a number of strategies and ways that could help you to budget, care for, and protect your elderly parents.

Firstly, who could this impact and how?

There are approximately 16.1 million current or former unpaid carers in the UK, meaning just under a third (30%) of people had experience of unpaid caring in the UK.²

Around 47% of unpaid carers felt that caring had a negative impact on their finances and 49% of carers who had given up their work, say their income reduced by upwards of £1,000 a month. ²

Now that’s not to say there can’t be moments of joy when caring for loved ones, even if it’s simply watching a film together or spending time as a family. But it’s clear that caring for an elderly parent is no small task, placing emotional, physical and financial stress onto those required to assume the role of carer.

At a glance, these are our top five ways to best budget and care for ageing parents:

1. Start the conversation early
2. Implement a budget plan
3. Understand all available retirement funds
4. Help protect them from scams and fraud
5. Make use of other support available

Let’s get into covering each of these in more detail.

1.      Starting the conversation early

There’s never an easy time to discuss the topic of care with an ageing parent. However, the earlier you do, the easier it’ll be for the both of you to put a comprehensive plan in place – and to find comfort in knowing that your parent will never be left to face any uncertainty alone.

When talking to your parent, here are some topics you may wish to discuss:

• Any current diagnoses and medical requirements – such as medication and regular appointments. If you have a family history of any particular illnesses, consider factoring in the higher risk of inheriting these when planning for future care.
• Common changes in capacity that are associated with ageing – including reduced mobility, isolation as socialising becomes logistically more difficult, and an impaired ability to complete routine tasks. Knowing these, means that your parent’s quality of life will always be at the fore front of any decisions made.
• Their current and future finances – such as income, costs, savings, pensions, investments, assets and debt. Having a clear view of their financial situation will allow you to better understand how their care will be funded.
• Legal documents and protection cover – being aware of when an insurance claim may be possible and making sure that they have a will in place, could help to ease the burden on yourself should any difficult or unfortunate circumstances arise.
• Your situation and how much you’re able to commit to caring for your parent – whether that be financially or physically. You could consider issues like your locational proximity, the time you have available, your personal needs, financial support, and whether you hope to be hands-on or hands-off with the care provided.
• The nature of the care your parent may require as their situation and health changes – such as in-home (for example, visits from a care agency, live-in carer) or out-of-home (for example, independent living communities, assisted living communities or residential care).

After this conversation, both yourself and your parent should have a clearer and realistic view of the future – so that their later years can be some of their best as well as easing any future burden for yourself.

2.      Helping to implement a financial plan for care costs

To avoid the financial burden falling onto you, it’s important to implement a financial plan for funding the care your parent will receive.

The first step you could take is to draw up a realistic timeline of the financial resources that’ll be available to your parent as time progresses. By keeping track of monthly, or annual incomings and outgoings – as well as monitoring the value of any savings and assets over time – you’ll be in a better position to plan for the funding of the care solutions your parent will require as they age. The creation of a financial plan is no small task and there may be value in getting expert support from a financial adviser. You can find a financial adviser through MoneyHelper – but it’s worth considering that a financial adviser is likely to charge for their service.

Although there’s no certainty to how your parent’s health and medical requirements could change over the coming years, it may be beneficial to include in their financial plan rough ideas of when your parent could require specific care solutions. For example, you might predict that your parent could need in-home care from the age of 80 onwards and plan accordingly from there.

Some points to consider when overseeing their financial plan:

• Regular conversations – life moves fast, which is why checking in regularly with your parent could help you both understand when you need to review your financial plans.
• Budgeting apps – despite the possibility of limited technological knowledge, budgeting apps can help you and your parent to keep track of their finances.
• Power of Attorney – there may come a time when your parent becomes unable to make the best decisions for their wellbeing. Power of Attorney is a legal document, signed by a competent adult, that grants another the authority to make decisions on their behalf. In the UK, there are two types – Health and Welfare, and Property and Financial Affairs. If you need any more information on Power of Attorney, the Government has a dedicated webpage with more detail.

3.      Getting the most from retirement funds

Next, it’s important to recognise what investments and sources of income your parent has access to.

• The State Pension – this is an income provided by the UK Government, where the value is based on how many years someone has paid National Insurance whilst working. While the State Pension probably won’t be enough to support your parent on its own, it can be a useful addition to their retirement income. It can be claimed once they’ve reached their State Pension age which is currently 66 years old for both men and women.
• Private and workplace pensions – they could have a private pension(s) especially if they were self-employed in the past and are more likely to have at least one workplace pension if they’ve had an employer.
• Savings and other investments – chances are they’ll also have an easy access savings account of some sort. They could also have an Individual Savings Account (ISA) or a General investments Account (GIA) too. Understanding the terms and conditions for these accounts could help your parent plan for getting the most out of their investments.

When it comes to retirement, pensions can provide people with an income that allows them to maintain their quality of life as they get older. You can read our article on ‘How to plan for retirement – a step by step guide’ which provides information about the different pensions your parent may have and how to trace and track any lost pensions.

Remember that investments can go up as well as down, and you (or your parent in this case) might get back less than was invested.

4.      Protection from fraud and scams

Unfortunately, elderly people are often the targets of fraud and financial scams, as criminals look to take advantage of their unfamiliarity with technology. As well as causing undue stress and damage to their wellbeing, such criminal activity could also lead to financial losses that affect the ability to fund your parent’s care.

Here are some tips to help stop your parents becoming the victim of fraud or a scam:

• Encourage them to become more scam savvy - hang up on cold callers without giving out any details, and not let anyone into their home unless they’re sure they are genuine. Make sure you’re in the loop by asking them regularly if they’ve had any suspicious activity targeted at them recently.
• Setting up technological safeguards. To help avoid telephone scams, your parent could sign up to the Telephone Preference Service. This will opt their phone line out of the register that enables unsolicited callers to get in touch. For door-to-door scams, installing a video doorbell could act as a deterrent to cold callers, as well as possibly helping to provide evidence in the aftermath of an attempted or successful scam.
• In the unfortunate situation where a scam has been successful, it can be beneficial to have a plan in place that outlines how you should respond. Remember it’s important to notify your bank or pension provider as soon as possible, and they’ll always be happy to help authenticate any suspicious activity.
• Check out our Online security and fraud prevention hub for more support, or consider sharing this article, 6 simple steps to protect yourself from pension scams, with your parent for extra reading.

5.      Getting more support

Caring for an elderly parent is hard for so many reasons, but there are a number of organisations that may be able to help you with providing care, financial concerns and emotional support.

For example, you can get in touch with the local council to arrange for a home assessment of their property. They’ll identify possible adaptions that could be made to their home such as stairlifts, ramps, or a walk-in shower, and should fully cover the cost of any small alterations.³

Additionally, both yourself as the carer and your parent as the recipient of care, may be eligible for financial support from the government – including the Carer’s Allowance and the Personal Independence Payment. Benefits such as these can help you to fund the care your parent requires.

Lastly, there are number of charitable organisations that can support you through the emotional strain that can come with caring for a loved one. For example, Age UK, the country’s largest charity for elderly people, run their advice line – a phone service that is open 8am to 7pm, 365 days a year, purely to provide emotional support to those who have selflessly assumed the role of carer.

Finally, make sure you keep the conversation going so you know where you stand

As we generally live a little bit longer, the responsibilities we hold are ever-changing – none more so than the support our parents need as they inch further into their later years.

Providing care to a loved one is a daunting task that can be unsympathetic to your time, finances, and your emotions. However, it can be made easier with a little bit of planning and open communication – and there will always be support for you when times are at their most difficult.

For more articles on financial planning, wellbeing and research, visit our Money tips hub. Or, to explore the UK’s ever-evolving later-life landscape, read our Second 50 report which combines the latest national statistics with our own research to create a comprehensive view of the latter half of a longer and more varied life.