Family and Money: Tips for Discussing Finances and Retirement with Your Loved Ones

Family and Money: Tips for Discussing Finances and Retirement with Your Loved Ones

This year family gatherings may be different (more Zoom, less slobbery kisses and heart felt hugs), but it will undoubtedly feel more important than ever to celebrate togetherness. While the focus of our gatherings will still be on love and celebration, the holidays are also an opportunity for discussions related to family and money.

Like it or not, your finances and current or future retirement will likely impact your adult children (and vice versa).

Talking about money may be one of the most difficult conversations — no matter if you have a lot of resources or not very much at all. However, these conversations can actually strengthen everyone’s finances and relationships. Here are tips to help get the ball rolling to discuss finances with your family.

Yes, You REALLY Do Need to Discuss Finances with Your Family

While it may be incredibly difficult, if you are lucky enough to have family, it is very important to discuss finances with them.

Not sure? Take a look at some of the facts:

The National Alliance for Caregiving and the American Association of Retired Persons (AARP) estimate that 22.4 million U.S. households – nearly one in four – are now providing care to a relative or friend.

FORTY percent of baby boomers who have a living parent are helping take care of that parent – either financially, personally or both.

Of the boomers who are not yet providing care for their parents, THIRTY-FIVE percent think that they will be doing so in the future.

NerdWallet found that 80% of parents of adult children are covering, or have covered, at least a portion of their adult children’s expenses after the child turned 18.

Despite the overwhelming evidence that they will need to do so, most people — around 90% — are not including support for family members in their retirement budget. Here are some reasons why you need to discuss finances with your family.

Communicating About Money Makes Everyone Better at Personal Finance

There is a tendency for one generation to make money, the next to waste it and the third to end up with nothing.

Dr. Dennis Jaffe, a sociologist and one of the leading architects of the field of family enterprise, studied trends of inter-generational wealth and he discovered that families that retain money are better at communicating than other families.

Open Talk About Money Also Leads to Financial Confidence

“Families who talk about money tend to feel more confident so it’s encouraging to learn that many siblings are having financial conversations,” said Marcy Keckler, vice president of Financial Advice Strategy at Ameriprise Financial.

“Problems can occur in family relationships when money is not discussed between parents and children — the same holds true for siblings. It’s important for siblings to keep open lines of communication about money so that they can work toward common goals, like caring for aging parents.”

However… Think About Family Members Not Family Money

Dr. Jaffe also discovered that financially successful families have focused on people, not on money.

They have invested in education for family members and have taught everyone about their family business or the details that have given them success in life.

Individual Relationships Matter, but Remember You Are a Family Unit

Sometimes when there are touchy topics to be discussed, it is easier to talk directly with just one member of your family. However, remember that everyone might be impacted by decisions. It is important to figure out a way to keep everyone involved.

What to Talk About When Discussing Finances with Your Family

You may or may not realize it, but there are a lot of money matters you need to discuss with your family members. And until you broach the topic, you might not realize how your individual decisions are misunderstood by others within your group.

Here are a few topics that you may want to address:

Start by Knowing and Sharing Your Financial Strengths and Weaknesses

Celebrate your financial wins with your family! And, share where you could use some help!

The worst financial problems are the ones that get swept under the rug. Everything else can get solved.

Not sure about your financial strengths and weaknesses? Be sure to log into the NewRetirement Retirement Planner to assess where you stand right now and where you will be in the future. See your net worth, potential estate values, try out different long term care solutions and more!

Talking About Inheritance Does Not Usually Result in Lazy Heirs

Many people believe that telling their children about a potential inheritance can demotivate their heirs from working hard.

However, money management professionals believe this to be more myth than reality. Alison Comstock Moss, chief executive of Paul Comstock Partners, which advises wealthy families, told the New York Times, “The myth is usually that their kids are going to be ruined by the money, that money will be what ruins everyone. I just don’t see that as often as I see mismanaged expectations and a lack of training and preparation. Bad decisions get made because they don’t know any different.”

Long-Term Care

No one wants to plan for long term care. We simply don’t want the need to arise. However, you need a plan and, if that plan will involve your children in anyway, they need to know.

You need to make sure that they are willing to step in and facilitate or provide care.

Your Current Retirement Plan

Being transparent means sharing your plan with your children. Topics you should discuss as a family include whether or not current retirement plans are affordable. Adult children of retirees should help assess what changes parents can make to their plan if it looks like they will live longer than they anticipated in their budget.

After all, it is the adult children who will need to pick up the pieces if money runs out.

Your Home

Talking about the house you grew up in or raised your family in can be a difficult and emotional topic. Too often, however, it’s also a taboo topic.

Don’t be afraid the break the taboo and ask each other, how many of us care about the family home? Will the home’s value be used for retirement or medical expenses? What will the heirs do with if after their parents have passed?

Children and Grandchildren’s Expenses

Demands on your finances by family members can make it hard to save for retirement. It can force many to continue working long past their planned retirement age, and it can bust your budget once you’re retired. Read more in our article 5 Reasons Why Your Loved Ones Could Put Your Retirement at Risk.

When you are going over your extended family’s finances, ask who is paying for the children’s education, insurance, mobile phones, and other living expenses? What is the expectation for grandchildren’s education and other expenses? Will you welcome boomerang children home? Or, do you see that as a potential problem?

Once You’re Ready, Schedule a Meeting

The key to success is preparation. It may sound too formal to have a scheduled family meeting about finances, especially at a time when we’re predisposed to think about relationships and feelings that transcend money. But a more formal setting and some advance planning will install guardrails on your discussion and make sure everyone stays on track.

Here are some techniques to help you guide the discussion in a productive manner.

Focus on Shared Values to Drive a Discussion of Finances with Your Family

The values that are important to you — and how those values relate to the money you have or don’t have — is a good place to start a financial conversation.

Dune Thorne, head of the Northeast region at Brown Advisory told the New York Times, “What we see consistently in families that can pass along assets is it’s really about passing along values and legacy. It’s the values that make them successful, not the actual assets. And if the values transfer, the assets pass more easily.”

Dr. Jaffe suggests that you:

  • Share thinking about the meaning of money, as well as personal and family goals
  • Exchange questions, concerns, hopes, and fears about wealth, the future, and responsibilities
  • Discuss the family “story” — the history of the wealth and family enterprises at hand
  • Invite younger generations to contribute their thinking
  • Establish a values framework for personal and family decision-making and expectations going forward

If you focus on your values, it can be easier have financial conversations. For example, let’s say education is what is most important to you and you have direct relationships with all four of your grandchildren, three from your son and one from your daughter.

If you have chosen to pay for your grandchildren’s education, it might be perceived that you are giving more money to one branch of the family than the other. But if everyone knows that education and your individual relationships are what is important to you, especially if your children share those values, then your decisions will make more sense to everyone.

Be Sensitive to Individual Differences and Rivalries

It is likely that some people in your family are more financially secure than others. It is important to be sensitive to perceived inequality. Be mindful of talking about a fabulous vacation with a family member who might be struggling to pay their mortgage or are still working when they would rather be retired.

Be sensitive to differences.

However, the notion of sibling rivalry — at least when it comes to finances — appears largely overblown. A 2017 study by Ameriprise Financial found that while 57% of people say they deal with financial decisions differently from their sibling(s), only 15% report having conflicts with them over money.

But when they do disagree, it usually involves their parents. Nearly 70% of sibling money quarrels focus on such issues as:

  • How an inheritance gets divided
  • Which child provides more support for their parents
  • Whether parents are fair in their financial support of the children

Don’t Mix the Financial Conversation with the Celebration Itself

While a family celebration gives you the opportunity to be face-to-face with your loved ones, you should not try to discuss delicate money matters during the party itself.

Don’t bring up your desire to get a reverse mortgage or eliminate someone from the will while carving the turkey. Instead, set aside a specific time to discuss these issues.

Make Family Money Meetings a Regular Thing

You cannot expect to have one conversation and never again. In fact, your first family money meeting might be a disaster. However, if you make talking about money across generations a tradition, then things are likely to get easier and easier as time goes on.

Tips for When the Going Gets Tough

If the conversation gets emotional, here are a few tips:

  • Take deep breaths before responding.
  • Express sympathy to your family member, and try to see things from their point of view.
  • Do more listening and less talking.
  • Avoid push-button behaviors. Everyone has certain quirks that drive other family members crazy. Try to acknowledge these to yourself and attempt to avoid saying things that add an extra layer of complexity to an already complex situation.
  • If appropriate in your family, humor can disarm heightened emotions. Laughter is usually a welcome salve for difficult conversations.

If you aren’t sure how to fix a financial issue, consider getting professional help from a fiduciary financial advisor.

Talk with a NewRetirement Advisor today.

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