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It takes years to master personal finance. And after all that work – after all the mistakes and missteps, all the triumphs and big accomplishments – you’d like to believe that you’ll always be able to successfully and confidently manage your money. Unfortunately, it often doesn’t work that way.
Experts sometimes refer to it as the “Independence Myth”. It’s the idea that once we reach adulthood we’ll always be able to take care of ourselves, physically, financially, and otherwise. Even as we see our parents, grandparents, and others begin to struggle in their later years, we have a hard time accepting the possibility that it could happen to us.
A recent survey conducted by Fidelity Investments revealed that only nine percent of adults aged 50 to 80 feel they may one day lose the ability to manage their personal finances, despite the fact that 60 percent of that same population has seen a friend or family member become unable to manage their day-to-day finances. “It won’t happen to me,” seems to be the prevalent thought, even as 40 percent of respondents are already helping to manage their own parents’ finances.
It’s understandable. No one wants to lose control, in any facet of life. We don’t want to feel like a burden to others. But the hard reality is that certain abilities slip with age. As Fidelity notes, studies have shown that our financial decision making tends to peak around age 53 and begins to decline afterward, no matter how well we take care of ourselves.
The idea that we’ll never, ever lose our independence is a dangerous one, because by the time you really need help you may not be in a position to recognize that fact. That’s why it’s much better to let trusted loved ones provide assistance while you’re still able to manage money on your own.
Many experts suggest the 50/75 rule, where an adult child will begin taking an active role in managing their parents’ finances when the child turns 50 or the parent turns 75. Using this rule can help to cut back on some of the hard feelings that may come with this transition. Instead of taking over the management of a parent’s finances because you think they can’t handle it any more, here you’re simply taking the reins at a previously agreed upon time.
Another reason why the Independence Myth can be so dangerous is that the elderly are, unfortunately, highly susceptible to financial abuse and scams. A 2010 survey found that one in five American seniors (65 and older) have been victims of some form of financial abuse, at a cost of over $35 billion a year. This makes it even more urgent that families formulate a plan for assisting parents and other relatives as they enter their senior years.
If you have elderly loved ones who suffer from mental or physical disabilities, live alone, have recently lost a spouse, or are simply uncomfortable or poorly educated about financial matters, they are at an even higher risk for scams and financial abuse. If you aren’t able to help them directly, make an effort to connect them with trustworthy friends or professionals who can.
MMI is also pleased to offer Senior Solutions, a collection of programs and services designed to address financial needs specific to consumers aged 50 and older. If you or someone you know has questions or concerns surrounding Medicare, Social Security, managing debt during retirement, maintaining your budget on a fixed income, and much more, be sure to visit MMISeniorSolutions.org or call us at 800.454.8615.
We’ll all need help someday. If you know a relative or loved one who is struggling to manage their finances, step up and offer to lend a hand. When the roles are reversed you’ll be able to appreciate just how much your support and assistance can mean to someone in need.
Great advice...if you have a family. No information here for people without children, or people who have no family left (or, like me, never had one to begin with). The "independence myth" is only the tip of the iceberg when it comes to aging and finances. A critical topic when it comes to money and aging is "elder orphans"--older people with no family to help them with financial instruments like wills (who will be my executor when I have no family left and all my friends are dead?), trusts (whose name will I put on my assets?), insurance beneficiaries, funeral arrangements, and much more. I need much more specific information about what to do when there's NO ONE to lean on. I get so weary of organizations that simply assume everyone has children, a spouse, and a large family, the members of which are just dying to jump right in and handle someone's finances. THAT is the dangerous myth here.
Such a great article. 50/75 is an excellent guideline. But, what if the parent is untrusting, or is adamant that they don't need help? You can't really force things..
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