Almost every day there is an article in the news about financial fraud. Much of it impacts seniors, like a recent scam involving fraudsters posing as social security representatives. However, we are all at risk, especially if we believe we are too young, too smart and too vigilant to fall for a scam. Sadly, the scam artists are very sophisticated and intelligent too, and are experts at separating people from their money.
That said, much of the financial fraud targets seniors, because our cognitive ability declines as we age and this reduces our ability to handle financial complexity and makes us vulnerable to abuse. Furthermore, seniors who live alone are particularly vulnerable. Here are several things you can do to protect yourself and loved ones from financial fraud.
- Do a Credit Freeze. Due to the number of data breaches in recent years that have exposed thousands of people’s social security numbers and other sensitive data, it has become increasingly likely that a fraudster can open accounts in your name. Using a credit monitoring service is not enough as this will only alert you after you’ve been a victim. The best approach is to freeze your credit at all 3 major credit agencies. It’s a slight hassle to unthaw your credit when you want to open a new credit line, but this is far less of a hassle than cleaning up after being a victim of financial fraud.
- Simplify Your Financial Life. One of the best things you can do to reduce the chances you’ll be taken advantage of is to reduce the number of accounts you have and the number of financial institutions you use. Having money spread all over the place just increases the odds your login information can be hacked, fraudsters can pose as representatives from one of your institutions, or that you’ll not notice fraudulent activity.
- Limit Access and Block Large Transactions. The first step in preventing fraud is to limit the money that can be easily accessed by not keeping large sums in checking accounts. Keep large savings accounts with a separate institution so that it takes a day or two to make a transfer. Next, if your bank allows you to set alerts for large transactions or block transactions over a certain size, set these up. Ideally, notification would go to your future financial caretaker so a trusted person can be notified, too. If your bank does not allow for such alerts and blocking, then set up an account aggregator such as Mint, Yodlee or eMoney as they do allow you to set up alerts on large transactions.
- Involve Your Financial Caretaker Early. It’s important to have a potential financial surrogate in place long in advance of cognitive decline. Identify a trusted family member or friend to be your financial caretaker and start conversations long before you feel you need to turn over your finances. Consider giving them access to your account aggregation platform so they can monitor your account activity and be notified of large transactions and suspicious activity. Share with them how you pay your bills, who your financial advisor is and enlist their help in paying your taxes.
Financial fraud is rampant. However, with a bit of preparation and communication, you can significantly reduce the odds that it happens to you and your love ones.