Talking about money, in any setting, can feel taboo at best. Whether you struggle with money or you have plenty, it can be hard to know who to talk to money about and when. You may have children or close family and friends you are supporting financially, or you could have parents whom you are supporting through aging, retirement, and end of life. Whatever your situation is, you may be wondering if and when you should talk to your family about money. Because two of the biggest instances we see with our clients are money talks with kids and aging parents, we’re diving into how to make that happen below.
Talk to Your Kids About Financial Plans
As parents, the “money talk” can take many forms. Whether you’re talking to your kids about saving or spending their allowances, the costs of college, or how your family budget works, there are a lot of little conversations about money. But every family is different, and for some of us, money was never an acceptable topic of conversation. If you’re hoping to break that cycle, and to really show your kids how money works both now and as you retire, it helps to talk about it.
One of the best ways to start is by talking about your money values, not just the money you make or spend. If saving money for retirement or for your child’s college fund is important to you, say that. If you give in tithe or to charities, explain how that works and why you think it’s important. From there, you can build up to a conversation about money and exactly how you organize finances. This could be showing them how you balance your checkbook (if you still do that) or monitor the family’s spending by checking your online bank every week. You can also include kids of any age in larger financial goals, such as buying a new couch or fixing the water heater, to give them realistic expectations of expenses and patience.
As kids get older, you can also engage teens in the actual finances, explaining how much you have for retirement or in insurance policies in the event that something happens to you. College finances are big topic of discussion, whether you can help pay for it or not. Explaining to your teen how loans work, how interest works, and how you feel about him or her using credit cards can give your teen a realistic and transparent view of money as they enter adulthood.
Of course, this can help guide future conversations, as well as help teens gain a stronger understanding of how money works. After all, most high schoolers are making decisions about their future careers with no reference point. They don' t know if their chosen major will help them achieve their parents' lifestyle or if their expectations are way off. They won’t even know to ask that question, so it’s your job as a parent to help orient them.
Also note that new studies show that money habits are set by age 7, so the younger you can start making kids aware of how money works in your family, the better! If you’re wondering how to structure these conversations, however, we share a few tips down below.
Talk to Aging Parents About Their Finances
There is nothing worse than needing to make decisions for someone else, not knowing if it’s what they really want. That’s why we always tell our clients to talk to their older parents about money. It’s not about figuring out how much money they have so you can spend it; it’s about knowing what resources they have to tap into, how their accounts are set up, and who can execute on financial decisions should something happen to them. This transparency and honesty can also make it a lot easier for you to care for your aging parents in a way that honors them, and can prevent them from feeling isolated or under-cared for.
Financial conversations with older parents can start, just like with your kids, by talking about their values. What do you they want to do with their money? Do they want to spend it on in-home care if they need it? Do they want to give to charities still? It can also include the more tangible, practical side of money, like whether they have estate planning and wills in place, or if they know what they want to do with the house if they need to move. It’s also practical for you, as the child, to know where everything is located. Ask your parents to show you their documents or financial “headquarters” in the house, and how they pay bills or balance their checkbook.
If their finances are scattered (literally and figuratively) across the house or in multiple accounts, you can use this time to help them and you get organized. The Personal Records Organizer is a great way to do this, and you can work with your parents’ financial planner to consolidate multiple retirement or savings accounts if that’s what they believe is best. Getting a financial power of attorney is another great way to ensure that your parents are properly cared for in the event they can’t manage their finances on their own. Of course, these are not always “fun” conversations to have, which is why we’re also sharing tips on how to structure your money talks.
Know Why You’re Having the “Money Talk”
Money talks can feel almost as uncomfortable as the “birds and the bees” talks for some families. If you didn’t grow up with parents who were transparent and honest about money, it can feel like an entirely foreign experience to you. But it’s important to have these conversations, whether it’s with your kids or your aging parents. That’s because financial conversations empower everyone to handle money, not just one person like in most older generation households.
That’s why we focus on the PMO of money talks — the purpose, the method, and the outcomes.
Purpose: Before you have a conversation with your kid or your parent, think about the purpose of the chat.
Are you just hoping to start a conversation?
Are you hoping to find out specific information?
Do you want something to change or happen in the immediate future?
Method: Once you know why you’re having the conversation, figure out how you’re going to start it.
Will you ask your teen to sit down with you when you’re doing the budget?
Are you going to ask your mom about the finances before your dad?
Do you want to have anyone else involved in the conversation?
Outcomes: Finally, ask yourself what you’re really hoping to get out of the conversation, and what you want to happen as a result of it.
Do you want your parents to fill out the Personal Records Organizer?
Do you want your young child to start saving more instead of spending?
Do you want your teen to fill out student loan applications?
Sometimes the outcomes of money chats aren’t tangible; you won’t know if your parents are OK financially or if your kid is going to make smart money decisions as an adult. But what you will have done is open the door to those conversations so that people can have an easier time coming to you in the future. Plus, you’ll have at least a better idea of what your parents’ money looks like or how your child will interact with money as an adult. From there, it’s just about being available and continuing to communicate.