Family and Money: Tips for Discussing Finances With Your Loved Ones
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 14 tips for talking money with your family:
There is Likely a Lot to Discuss
You may or may not realize it, but there are a lot of money matters to discuss with various family members. And, you might not realize how your decisions and your family members’ decisions are not well understood by others and how choices impact their (and your) finances.
Here are a few topics that you may want to address:
- Be honest about inheritances (or lack thereof) — those you think you will receive and what you would like to give.
- Do you understand your parents’ plans for long term care. Is that financially viable? Are you involved? Is your involvement okay with you?
- Do your family members understand your plans and wishes for long term care?
- Can your parents’ afford their current retirement plans?
- Do your children understand if you can or cannot afford retirement?
- Do people care about the family’s home? Will the home’s value be used for retirement or medical expenses?
- Who is paying for children’s education? Insurance? Cell phones? Other living expenses?
- Who is paying for grandchildren’s education? Other expenses?
- Will you welcome boomerang children home? Or, do you see that as a potential problem?
- What is the history of family booms and busts?
- What has changed in anyone’s finances over the last year that might impact others?
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 mix the party with the delicate need to discuss money matters.
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.
Focus on Values
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. Dennis Jaffe, a sociologist and one of the leading architects of the field of family enterprise, 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
Values Drive Financial Decisions
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 4 of your grandchildren, 3 from your son and 1 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.
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. Jaffe 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.”
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 and the details that have given them success.
Talking About Inheritance Does Not Usually Result in Lazy Heirs
Many people believe that telling their children about a potential inheritance can demotivate 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.”
Be Sensitive to Inequality within the Family
Life is not fair. Families aren’t fair. As my son’s football coach said, it’s not personal, it’s reality.
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 empathetic and aware of how you might sound.
Siblings Are Not Actually Big Rivals
The Ameriprise Study 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. In other words, the notion of sibling rivalry — at least when it comes to finances — appears largely overblown.
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
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.
Prepare in Advance
Think in advance about your goals for talking with family members.
Do you want to convey information or discuss options? Write up notes for what you want to cover.
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 If the Going Gets Tough…
If the conversation gets emotional, here are a few tips:
- Take deep breaths before responding.
- Express empathy to another family member, 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.
Yes, You REALLY Do Need to Talk Money with 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.
Get Help if Necessary
The worst financial problems are the ones that get swept under the rug. Everything else can get solved.
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.