Financial Management

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Financial management


Financial management is a general term for dealing with money matters. It includes paying bills, drawing up and revising a budget, keeping financial records, planning for retirement and future expenses, and making a will in order to bequeath one's remaining assets to others.


Financial management is listed among the instrumental activities of daily living, or IADLs, because it is a necessary part of living independently within the community. Older adults who can no longer manage money require a caregiver to help them

Percentage of total of U.S. households annual expenditures by age, 2005
Expenses45–5455–6465 and over65–7475 and over
source: Bureau of Labor Statistics, Consumer Expenditure Survey
(Illustration by GGS Information Services. Cengage Learning, Gale.)
Personal insurance and pensions13.2%11.9%5.4%6.7%3.5%

or else be placed under conservatorship (also known as guardianship).

Unlike some other everyday activities that require physical mobility or coordination, financial management depends more on the senior's cognitive abilities. It is therefore possible for an older adult to manage money and keep records of expenses even though he or she may have physical disabilities. The key factor in competency in continuing to manage money is short-term memory; it is when a senior's short-term memory begins to fail that he or she may have financial problems. These usually take the form of forgetting to pay bills or misplacing the checkbook or financial records. Seniors who are in the early stages of Alzheimer's disease may also lose the ability to make change or may accuse others of stealing from them.

Some recently widowed older adults may need some initial help in managing money because they lack experience, not because they are incompetent. If the senior's spouse had taken care of financial matters, the survivor may need some practice in learning to manage money and feel comfortable doing so. One suggestion that is often made to simplify money management for seniors is to ask their bank for information about direct deposit and automatic bill payment programs. Social Security, investment dividends, paychecks, and some other forms of income can be paid directly into the senior's checking account, while utility bills, rent or mortgage payments, and insurance payments can be made automatically.


Family issues

Financial management can become a major source of trouble for a senior's family. One reason is the symbolic power that money holds for many people; it may represent independence , security, basic worth, love, power, self-sufficiency, dignity, and many other emotionally charged values. When an older adult begins to have difficulty with money management, he or she may get quite angry if other family members offer to help out. Seniors may be secretive about their income (both the amount and the sources) or resent well-intended advice.

Another source of friction between generations and among siblings in a family is the use of the senior's resources. Although earlier generations of retirees often tried to conserve money for their heirs, many baby boomers have adopted the attitude that they would rather spend their money on themselves. While many younger adults accept their parents' wish to enjoy life after retiring, others resent the thought of not having an inheritance. There can also be intense disagreements among adult siblings about the cost of a disabled senior's care; some may be willing to use all their parent's assets for his care and comfort, while others may prefer to conserve their potential inheritance. It may be necessary to hold a family meeting with a professional counselor to discuss disagreements over finances.

Planning ahead

Several recent studies, including the National Institute on Aging's (NIA) Health and Retirement Study, have reported that relatively few older Americans take advantage of financial planning offered by their employers; that they are uninformed about changing Social Security regulations; and that they are counting on retirement benefits that may not be there. In addition, almost half of workers who have some savings for retirement have less than $25,000 put aside; of those who have not saved for retirement, 70 percent have assets worth less than $10,000. Given these statistics, older adults still in the workforce should begin to plan for their financial future if they have not already done so. As the NIA points out, some communities have financial counselors who offer their services on a volunteer or sliding-scale basis. Lawyers or geriatric care managers can also help with financial planning.

A second important aspect of planning ahead is gathering one's financial information and putting it in one place (a file, safe deposit box, notebook); telling a trusted friend or family member where the information is stored in case of emergency; or giving this information to a lawyer if no family member is available. The following types of financial information should be included in the file or log:

  • Sources of income and assets (pensions, IRAs, etc.)
  • Social Security and Medicare information
  • Insurance information (car, home, health, etc.) with agents' names and phone numbers
  • Name of bank(s) and account numbers (checking, savings, etc.)
  • Credit and debit card names and numbers
  • Mortgage or rent information, including amount owed and due dates for payments
  • Investment income (if any), and brokers' names and phone numbers
  • Location of will with original signature

Avoiding conservatorship

One important piece of advice that is frequently given to older adults is the importance of avoiding conservatorship. Conservatorship, also known as guardianship, is a legal term that refers to the authority (and corresponding duty) of one person (the conservator or guardian) over the personal and property interests of another person (the ward). A senior who is no longer considered competent to manage money may be placed under the guardianship of a relative, a friend, or a court-appointed institution. Seniors and their families should consider taking action to avoid this situation. The most obvious reason is the senior's loss of some or most of his or her legal rights. Another reason is the potential for family squabbles over money ending up in lawsuits.

Some alternatives to conservatorship are:

  • Durable power of attorney (DPA). A DPA is a document that allows the senior to appoint another person to make decisions for him or her in the event of incapacity. DPAs are usually related to property, but can also be written to cover health care.
  • Advance directives. These allow the senior to make a living will or choose a health care proxy before the senior is incapacitated. They also minimize the possibility of disagreements over money among the senior's relatives leading to lawsuits. Taking a family disagreement to court often results in the court's appointing an outside person or institution as the senior's guardian.
  • Advance nomination. This measure allows a senior to name a conservator in the event that a court later decides that it is necessary.
  • Trust. This arrangement allows the senior (the grantor) to transfer property to another (called a trustee) into a trust for the senior's benefit.
  • Joint ownership. The senior can name a spouse or other relative as co-owner of their property; the coowner can legally manage the property if the senior is incapacitated.
  • Representative payee. If the senior is receiving benefits from a government agency, that agency can appoint a representative payee to receive, manage, and spend the benefits for the beneficiary.
  • Case/care management. In some cases, a geriatric care manager can help with decisions about finances and other matters affecting an incapacitated senior.


Conservator/guardian —An individual or organization named by order of the court to exercise any or all powers and rights over the person or financial assets of an incapacitated individual.

Instrumental activities of daily living (IADLs) —Activities necessary for independent living within one's community.

Trust —A property interest held by one person (the trustee) for the benefit of another (the grantor).



Houts, Peter S., ed. Eldercare at Home, 2nd ed., Chapter 17, “Memory Problems.” New York: American Geriatrics Society Foundation for Health in Aging, 2007.

Mace, Nancy L., and Peter V. Rabins. The 36-Hour Day: A FamilyGuide toCaring for People with Alzheimer Disease, Other Dementias, andMemory Loss in Later Life, 4th ed. Baltimore, MD: Johns Hopkins University Press, 2006.

Morris, Virginia. How to Care for Aging Parents, 2nd ed. New York: Workman Publishing Co., 2004.


Helman, R., J. VanDerhei, and C. Copeland. “The Retirement System in Transition: The 2007 Retirement Confidence Survey.” EBRI Issue Brief 304 (April 2007): 1, 4–24.

VanDerhei, J., and C. Copeland. “The Changing Face of Private Retirement Plans.” EBRI Issue Brief 232 (April 2001): 1–23.

Winston, N. A., and J. Barnes. “Anticipation of Retirement among Baby Boomers.” Journal of Women and Aging 19 (March-April 2007): 137–159.


National Institute on Aging. The Health and Retirement Study. NIH Publication No. 07-5757. Washington, DC: Department of Health and Human Services, 2007. [cited March 25, 2008].

National Institute on Aging (NIA) Age Page. Putting Your Affairs in Order. Bethesda, MD: NIA, 2006. [cited March 25, 2008].

Tips from the National Institute on Aging (NIA). There's No Place Like Home—for Growing Old. Bethesda, MD: NIA, 2006. [cited March 23, 2008].


Administration on Aging (AoA), One Massachusetts Avenue, Washington, DC, 20201, (202) 619-0724, [email protected],

American Association of Retired Persons (AARP), 601 E Street NW, Washington, DC, 20049, (800) OUR-AARP (687-2277),

American Bar Association (ABA) Commission on Law and Aging, 740 15th Street, NW, Washington, DC, 20005, (202) 662-8868,

National Association of Professional Geriatric Care Managers (NAPGCM), 1604 North Country Club Road, Tucson, AZ, 85716, (520) 881-8008, (520) 325-7925,

National Institute on Aging (NIA) Information Center, P.O. Box 8057, Gaithersburg, MD, 20898, (800) 222 2225,

Rebecca J. Frey Ph.D.

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Financial Management

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