So my father is in his late 80’s. He has just over $200,000 sitting in a zero interest checking account, accessible through his debit card. His memory is starting to go. Meanwhile my mom is physically and mentally incapable.
He also has even more money in his retirement account separately.
The bank is concerned that all that money is accessible through his debit card in case he or my mom fall for some scam. I am concerned he is earning ZERO interest. Even his savings account, with a relatively small amount of money in it, is still zero interest.
Granted, his retirement fund is invested, seems to be doing reasonably well, and he and my mom both get social security. They are alright financially for now, in a retirement condo, but really need a higher level of care.
If my siblings and I inherit anything, cool. But our attitude is that the money is my parents’, for their care, and if they use it all for their care, well, that’s what it is for.
But OTOH I don’t want them losing their money to a scam and giving up a lot of potential interest. My dad’s attitude is everything is fine, and I can make any chances I want when he is gone.
Are there any low risk financial steps I should recommend he take? The bank at least would like him to transfer more money from checking to savings for greater security – albeit still zero interest.
Father’s money is sitting in zero interest checking account?
byu/Salt_Squirrel9475 inpersonalfinance
Posted by Salt_Squirrel9475
25 Comments
Well… how about we start with your own financial setup?
Where are you keeping your savings so that you’re earning more than zero interest?
Is there any reason why you couldn’t talk to Dad/Mom about what you’re doing and how it’s been working out for you?
Sometimes the best solution is just modeling behaviors.
A high yield savings would give them $500-$600 per month and is safe.
Just open a HYSA at another bank
A few thousand bucks a year is likely not to make a dent in their situation. If Dad’s okay with earning no interest, let it be. Now, on the other hand, one of them falling for a scam could potentially drain all their cash reserves. I’d be way more concerned about that.
And put daily restrictions on the card. $500/day? 1k/day?
From what you’ve said it doesn’t seem all that urgent that he earns interest, and he is at an age where keeping things simple has value. If he would move some of the money to the savings account, that would reduce the fraud risk.
If they are old and their minds are going, who is the power of attorney? You literally said they need a higher level of care than they currently have.
That is the actually important issue. If they are not capable of making decisions then someone has to make decisions for them. Better to do it while they have capacity to decide how they want things to go.
If I was 80 sitting on 200 grand, I would take zero risk with it.
If his memory is starting to go, it’s time to seriously consider getting power of attorney or a guardianship setup. It will only become more difficult as their faculties continue to decline.
HYSA. The bank he uses likely offers them, but it he can’t get over 3.5%, find somewhere else.
I use Marcus by Goldman Sachs @ 3.65%
You can easily find a place offering slightly more.
You can also be on the look out for cash bonus offers with a high deposit.
The bank (with cooperation from your parents), should be able to restrict the amount the debit card can be used for. They could still get scammed but you can keep the damage to a couple thousand at most.
Look at a CD. It’s probably only 3.5-4% but in the no to low risk category.
I do agree your family needs to have “The Talk” right away. Almost all parents think they’ll be able to take care of themselves and die in their home. It’s not the case. You need to look at power of attorney and medical. You need to understand their financial situation while you can ask questions. Trust me you don’t want to figure that out on your own. You should discuss assisted living and home health care. Depending on your dad, you may need to phrase that as taking care of your mom.
Just move the bulk of it to a hysa, set up automatic transfer of say, 1000.00 or whatever they need in there per month for expenses or if not really used, just leave a few hundred in checking side, rest in HYSA.
HYSA is the likely answer but I also want to warn everyone that older people with minimal trust in financial institutions DO NOT trust or know about HYSAs so it’s not as easy to convince them to open up a new account of this kind at their age.
A real convo I had with my dad:
Me: you should put that large chunk of money in a HYSA. It’ll grow $X every month and you just get a 1099-INT for taxes.
Dad: OOOOOH they tax that too? That’s how they get you!
🤦♀️
High yield savings account is the obvious choice here. I would not screw around with any type of investment where there can be loss cause as you say, it’s not really your money/yet. Zero interest is a killer. You wanna do whatever you can to make sure it doesn’t sit there. Move at most $250k (FDIC limits) to an FDIC insured bank with a HYSA. Pick a real institution that isn’t hard to talk to
I have opened joint accounts with me and both of my respective parents. Me + dad is 1 joint account. Me + mom is another joint account. They put the bulk of their savings in there. Kept their spending money in their checking account.
Do what is needed to keep their money safe and grow safely. HYSA should be used, but also move a bulk of that money out into their IRA account.
This way if they ever do get popped it’s just their debit card and they are not fully drained.
Yes that money connected to a debit card with two vulnerable elderly parents is definitely a big deal. You need to step up and start taking a role in their situations both financially and health wise because they are connected. One can ruin the other. There needs to be safeguards in place. Withdrawal limits. Passwords. PINs. Power of attorney. Healthcare proxy. Wills. Trusts even. This is going to be a lot of work but if you don’t do it now it’ll be 100x harder when one dies and the other isn’t able to make decisions for themselves.
The one he is most likely to agree to is putting it in savings or CD at the same bank.
See if you can finagle a conversation with him, you and a friendly bank manager (sitting at a,desk, not the teller window) where they strongly recommend that. Leave a,LOT in the checking like 2-3, or even 6 months spending so he has no reason to panic or feel uneasy.
Oh, and make sure to set beneficiaries on any new accounts (if that’s what he is doing…some people purposely have no beneficiary so it goes to the estate.)
Good luck.
Tl;dr; get the bank to limit debit card transactions–and get your father to use a credit card instead, with an autopay every month from his bank account.
The biggest issue here is the fact that all of those funds are accessible with a debit card. That is the first thing that needs to be corrected. As someone else said, perhaps the bank could put a max limit on transactions, but that might not necessarily stop fraudulent transfers that could come some other way if the card is compromised. Debit cards do not have the same protection as credit cards and with a serious fraud there is no way to get the money back. With less serious fraud it may be possible but still takes a long time and can very stressful.
I’m retired but quite a ways from my 80s.
My cash flow is significant. I manage it. Selling / moving money from money market fund (SWVXX) or SGOV to checking. The Schwab savings account earns like nothing and I don’t use it. Having all in one institution is very convenient.
But $30-$40k not uncommon in checking.
You might look for an option that transfers funds monthly or something. In his mind I can almost promise this is risk mitigation. Doesn’t want that account to dry up and suddenly he has stress and problems that maybe he’s not comfortable sorting out.
He sleeps easy knowing he’ll never bounce a check. That’s a good thing. Don’t scare him he’s going to be scammed. He doesn’t need that stress. Give him an alternative that is super simple and he’s not going to overdraw his account yet earns competitive interest. He’ll be fine with it.
Do something NOW! I am talking out of experience. Ask your Dad to sign a power of attorney so if he is not capable anymore you or your siblings can do something. 200K sitting there is really bad. Probably the risk of an investment is too much for him to deal with but get together with siblings and your Dad and make a good plan.
I am dealing with my mom dementia and I am stuck. Can’t do anything! Very frustrating
My dad left a lot of the proceeds from the sale of his house sitting in his (joint with me) checking account for months. Similar six figure number. Yes, it annoyed me that he wasn’t earning interest and the bank was.
But the real concern was the same as yours. What if someone accessed the account and stole the funds?!?
I’m with the bank. At least get him to move it to a savings account that is not tied to a debit card or anything else. No direct debits, social security deposits, nothing. The better option is to move it to something like an online HYSA where it is completely separate from the bank and they can earn a decent 4% or so return.
Also, if you can get him to make you or a sibling a co-owner of one of his accounts, it is much easier than trying to invoke a POA, if they even have one.
You don’t say so, but I gather he resists the idea of moving the money? There are several suggestions already in these comments about better places to put it.
If (one of) the problem(s) is that he doesn’t want to move it, perhaps you could talk him into using a credit card instead of a debit card. Fraudulent use of a credit card has better protections than debit cards, and gives an extra step before the money is paid out (i.e., getting statement and making the (full) payment), and likely doesn’t cost anything. You could offer to handle the mechanics of doing the payment for him; it would also give you a monthly review of where the money is going.
You could try to convince him to do this by referring to the beter protections, possibly also a cash rewards program. If his bank is expressing concern, perhaps they’d help you out with that.
Then take the debit cards, put them in a sealed envelope, and never use them.
To be frank I don’t think it matters what anyone here says, without dad wanting to change something it’s pointless. Unless you are going to try and get control over his accounts by having him deemed unfit.