This year, we hope to see a return to the tradition of enjoying Thanksgiving turkey around the table with friends and family, rather than over Zoom. Although our holiday gatherings are focused on love and celebration, this occasion is also an opportunity to discuss money with loved ones.
Like it or not, your financial situation and current or future retirement benefits can impact your adult children and elderly parents (and vice versa).
Talking about money can be one of the most difficult conversations you have, whether you have a lot of resources or none at all. But these conversations can actually strengthen everyone’s finances and relationships.
Here are some tips for talking about money with your family.
More likely to be able to financially support aging parents and adult children
The evidence is clear that you are more likely to financially support your aging parents and adult children.
I don’t know? Let’s look at some facts.
of National Nursing Care Alliance And that American Association of Retired Persons (AARP) It is estimated that 22.4 million households in the United States (nearly 1 in 4 households) currently provide care for a relative or friend.
Forty percent of baby boomers with living parents help care for them financially, personally, or both.
Among baby boomers who are not yet caring for a parent, 35% think they will do so in the future.
and, Nerd wallet It was found that 80% of parents of adult children are or are responsible for at least some of their adult child’s expenses after the child turns 18. In fact, the study found that households, on average, may have $227,000 more in retirement savings. What if you can’t cover your child’s living expenses and college tuition?
Everyone can become better at personal finance by communicating about money
One generation tends to make money, the next spend it, and the third generation ends up with nothing.
Dr. Dennis JaffeA sociologist and one of the leading architects in the field of family business, he studies intergenerational wealth trends and finds that families that keep money communicate better than others. I discovered.
Talking openly about money can also lead to financial confidence.
It is considered better to address the problem head-on than to hide it. This applies to almost everything, including finances.
“Families who talk about money tend to be more confident,” said Marcy Koechler, vice president of financial advice strategy at Ameriprise Financial.
“When parents and children don’t discuss money, it can cause problems in family relationships. The same goes for siblings. Siblings can communicate openly about money and care for elderly parents.” It is important to be able to work towards common goals such as:
But…think about your family, not your family’s money.
Dr. Jaffe also found that financially successful families focus on people, not money.
They have invested in their family’s education, teaching everyone about the details that have made their family successful in business and life.
Personal relationships are important, but remember you are part of the family
If you need to discuss a sensitive topic, it may be easier to talk to just one family member in person. However, keep in mind that everyone can be affected by the decision. It’s important to find ways to keep everyone involved.
What to say when discussing money with your family
You may not realize it, but there are many money issues you need to discuss with your family. And until you broach the topic, you may not realize how your personal decisions are being misunderstood by others in your group.
Here are some topics to cover.
Start by knowing and sharing your financial strengths and weaknesses
Celebrate your financial successes with your family! And share where we can help.
The worst financial problems are the ones that get swept under the rug. Everything else can be resolved.
Not sure about your financial strengths and weaknesses? Be sure to log into your NewRetirement Retirement Planner to assess your current position and future position. See your net worth, potential real estate value, explore different long-term care solutions, and more.
Discussing inheritance usually does not result in lazy heirs
Many people believe that telling children about the possibility of inheritance can discourage heirs from working hard.
However, wealth management experts believe this is more myth than reality. said Alison Comstock Moss, chief executive of Paul Comstock Partners, which advises wealthy families. new york times“The myth is that money ruins kids, that money ruins everyone. It’s just mismanagement of expectations or lack of training and preparation.” You don’t see it that often. They don’t know the difference, and the wrong decisions are made.”
long term care
No one wants to plan for long-term care. We just don’t want that need to arise. However, planning is required. And if your plans involve children, you need to let them know.
You need to make sure that they are willing to step in and facilitate or provide care.
Current retirement plan
Being transparent means sharing your plans with your children. Topics to discuss as a family include whether your current retirement plan is affordable. Adult children of retirees should help parents evaluate what changes they can make to their plans if they are likely to live longer than expected on a budget.
After all, it’s the adult children who have to pick up the pieces if the money runs out.
Talking about the home you grew up in or raised your family in can be a difficult and emotional topic. But it’s also often a taboo topic.
Don’t be afraid to break the taboo and ask each other how many of you care about your family. Can the value of your home be used to pay for retirement and medical expenses? What will the heirs do after their parents die?
expenses for children and grandchildren
Financial demands from family members can make it difficult to save for retirement. As a result, many people may be forced to continue working past their planned retirement age, which may result in financial ruin after retirement.
When looking at the finances of a large family, ask who pays for the children’s education, insurance premiums, cell phones, and other living expenses. How much do you expect your grandchildren’s education and other expenses to be? Will you welcome the Boomerang children into your home? Or do you think it’s a potential problem?
When you’re ready, schedule your meeting
The key to success is preparation. Scheduling a family meeting about money may seem formal, especially at a time when we tend to think about relationships and emotions beyond money. However, a more formal setting and advance planning will put guardrails on the discussion and ensure everyone stays on track.
Here are some techniques to help move the discussion along in a productive way.
Focus on shared values to facilitate money discussions with your family
Knowing the values that are important to you, and how those values relate to the money you do and don’t have, is a good place to start a financial conversation. .
Dune Thorne, Northeast Region Director, Brown Advisory, said: new york times“What we consistently see in families that are able to pass on assets is that it’s really about passing on values and legacy. It’s the values that drive success, not the actual assets.” . And when value transfers, assets transfer more easily.”
Dr. Jaffe I suggest the following:
- Share your thoughts on the meaning of money, personal and family goals
- Exchange questions, concerns, hopes, and fears about wealth, the future, and responsibilities.
- Discuss the family “story” – the history of wealth and family business
- Asking the younger generation to share their thoughts
- Establish a value framework for individual and family decisions and future expectations
Focusing on your values will make financial conversations easier. For example, let’s say education is most important to you and you have a direct relationship with all four of your grandchildren (three from your son and one from your daughter).
If you choose to pay for your grandchildren’s education, you may be perceived as giving one branch of your family more money than the other. But if everyone knows that education and personal relationships are important to you, your decisions will be better for everyone, especially if your children share those values. It will be meaningful.
Be sensitive to individual differences and conflicts
Chances are that some members of your family are more financially stable than others. It is important to be sensitive to perceived inequalities. Make sure to talk about your great vacation with family members who are struggling to pay their mortgage or who are still working when they would be better off retiring.
Be sensitive to differences.
However, the concept of sibling rivalry seems to be quite far-fetched, at least when it comes to economics.A 2017 study by Ameriprise Financial According to the survey, 57% of people say they handle financial decisions differently than their siblings, but only 15% say they have conflicts with their siblings over money.
But when there are disagreements, parents usually get involved. Almost 70% of arguments about money between siblings focus on issues such as:
- Mechanism of inheritance division
- Which child provides more support to the parent?
- Whether parents provide fair financial support to their children
Do not confuse financial conversation with the celebration itself
Family celebrations are an opportunity to meet loved ones in person, but sensitive matters of money should not be discussed during the party.
Don’t bring up your desire to get a reverse mortgage or exclude someone from your will while you’re carving the turkey. Instead, set aside a specific time to discuss these issues.
Hold regular family financial meetings
You can’t just have a conversation once and expect to never have it again. In fact, your family’s first financial meeting may be a disaster. But if talking about money becomes a tradition across generations, things will get easier and easier over time.
Tips for when you find yourself in a difficult situation
If the conversation becomes emotional, consider these tips.
- Take a deep breath before responding.
- Express your sympathy to the family and try to see things from their perspective.
- Talk less and listen more.
- Avoid pressing buttons. Everyone has certain quirks that drive other family members crazy. Recognize these things to yourself and try to avoid saying things that add further complexity to an already complicated situation.
- When appropriate within a family, humor can help defuse heightened emotions. Laughter is usually a welcome antidote to difficult conversations.
If you don’t know how to solve your financial problems, consider getting professional help from a trusted financial advisor.
Most people (approximately 90%) do not include support for their families in their retirement budgets, despite overwhelming evidence that they need to do so. Here are some reasons why you should talk to your family about money.