Mother’s Day and your future role as Mom’s money manager

Depositphotos_6869353_s-2015By Josh Miszk,

Special to the Financial Independence Hub

Most of us will care for our aging moms at some point in our lives, but helping our parents maintain their independence as they grow older can be a juggling act, particularly when it comes to their finances.

Before we are thrown into the overwhelming responsibility of managing Mom’s investments, it’s important to do some advance planning. For many, starting the conversation with Mom is the biggest hurdle, and what better time than on Mother’s Day?

Whether it’s day-to-day or long-term investments, here are a few things to consider when helping Mom with her finances:

Get a holistic view

Start by getting a complete picture of Mom’s current and expected cash flow needs. Look at her sources of income (like pension and CPP) and her living expenses to get a better idea of any cash shortfall her investments will need to cover.

Next, get a holistic view of her investment portfolio, including what investments she holds and where. To keep things simple and to minimize transaction costs, look at consolidating Mom’s finances at one institution.

Some investment managers offer a consolidated view of all your family accounts; for example Invisor offers what’s called a ‘household view.’ This tool gives you a full picture on an ongoing basis and allows you to track Mom’s assets and investment performance in real time.

Set up a simple and sustainable plan

Understanding Mom’s finances also helps to uncover any accounts or products she has but doesn’t need. Multiple bank accounts, safety deposit boxes, credit cards and insurance products that may have been useful at some point might not apply anymore. Cutting out some of those products simplifies what you’re working with and can save Mom a lot of undue cost.

Pension money may not keep up with the real inflation rate and may not be sufficient to cover cash flow. Look at the required cash flow from Mom’s investments — is it sustainable? A rule of thumb is to plan up to the age of 90 years old.

If Mom is drawing income from her investments, set up automatic withdrawals to cover expenses. Do the work upfront, create a simple payment schedule and review periodically. That way you can be sure Mom’s finances are on track and your time is spent efficiently.

Taking care of investments

When it comes to investment style and underlying investments there are some points to keep in mind. The first factor is to keep costs low; 1% cost savings on a $500,000 portfolio, for example, could mean an extra $5,000 for living expenses.

The second factor is her investment strategy. While GICs or Canada Savings Bonds may be Mom’s preferred vehicle, they’re not necessarily going to grow enough to sustain her cash flow requirements. Instead, think about good dividend-paying stocks.

If you’re not comfortable with the specifics of managing her money, work with a professional advisor who can highlight more important points. And since moms don’t always like to listen to us, working with an advisor can provide extra clout that will help you make smart money decisions for Mom that she also approves of!

DSC_0370(1)Josh Miszk is the Vice President of Investments at Invisor, one of Canada’s leading online financial advisor, which provides personalized investment management services. Josh’s goal is to make it easier for young Canadians, like himself, to create a plan for  their families and help them achieve their financial goals sooner.

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