Thoughtful and open discussions about money are a vital, yet often overlooked, aspect of your financial planning. Talking about money with loved ones can fulfill a variety of purposes, depending on who you’re talking to, and what you’re discussing; from establishing a strong financial education in youngsters, to defining your intentions beyond your lifetime for future generations.
For some families, talking about finances is easy. For others, however, it can be challenging. If you’re struggling to find ways to bring up wealth management with your adult children, here are some suggestions for getting the conversation started.
Discuss A Financial Topic You Recently Learned About
An indirect approach is the easiest way to open a dialogue. Try mentioning or forwarding a financial topic you recently heard about; perhaps something your advisor brought to your attention, or a topical news item. For example, health insurance is a hot topic right now, and is essential coverage that every adult should have, for their own physical and financial well-being, and that of their loved ones.
Talk About Taxes And Ways To Maximize Tax Savings
Similarly, tax season is a great time to discuss the perennially popular topic of ways to reduce taxes. Asking your adult kids if they’re making retirement plan contributions to reduce their tax burden is a great way to both start a financial discussion and find out if they’re focused on savings at the same time. Other topics include itemizing deductions, and completing charitable contributions that align with family values.
If They Have Kids, Ask About College Funding
College savings for your grandchildren is a natural and easy discussion topic. You can either ask directly if they’re saving for college costs, or ask about established college savings accounts to which you can contribute on behalf of your grandchild. You can also ask if you might be overfunding college savings, to get a sense of existing saving levels.
Ask How They Use Your Cash Gifts
Whether you’re transferring excess wealth, or helping out financially with cash gifts, you’re justified in asking your grown children how the money is being used.
- If you’re gifting, ideally your kids are saving that money. If not, ask if they’re saving in other ways, and if they’ve established a realistic financial plan for the future that isn’t dependent upon an inheritance, or at least assumes a conservative estimate. Otherwise, it might be time to meet with your advisor and rethink your gifting strategy.
- If you’re assisting your adult child due to financial need, help them develop a plan to overcome their current challenges. Consider what giving structure you can realistically sustain and if it ultimately benefits your adult child in the long-run. If not, make changes sooner rather than later.
Recommend An Advisor
If your adult child is focused on their financial future, they should be working with an advisor. Ask how the advisor is compensated (fee-only versus commission is a key consideration), and if they have regular and ongoing discussions in support of their long-term goals. If necessary, suggest that they consider an advisor, or introduce them to yours.
Inquire About Essential Insurance Coverage
Just about everyone has a story about family or friends that clearly demonstrates the importance of having basic insurance coverage. Such examples can make it easier to bring up this important financial topic. Life insurance is critical if your adult child has dependents of their own. Be sure to emphasize how the amount needed is almost always more than the coverage offered through work. Equally important is long term disability insurance, which can protect against potential loss of income following an accident or injury.
Make Sure They Have Basic Estate Planning In Place
Estate planning can be one of the most difficult financial planning discussions for many people to discuss with loved ones. Yet the truth is that everyone over the age of 18 needs basic documents in place like a Will, a Power of Attorney and a Living Will. Use significant life events like a marriage, birth of a child, or a divorce to ask your grown child if they have these estate planning essentials in place, and if they’ve updated them recently e.g., removing you as their primary beneficiary on retirement accounts and life insurance when they marry, or removing an ex-spouse post-divorce.
Share An Important Life Lesson You Wish You’d Known
A great way to alleviate stress in talking about finances is to discuss your own mistakes. Talk about a life lesson, why you wish you’d learned it earlier, and how it impacted you at the time, or even perhaps over the course of your lifetime. Such discussions help continue your kids’ financial education, regardless of their age, and sharing them opens up the opportunity for further financial dialogue.
Discuss Your Own Finances
The ultimate way of engaging in financial discourse with your grown children is to talk about your own finances. This doesn’t have to mean divulging your full net worth. It can simply be an overview of your general financial standing, plans and goals, wealth structures, and future wishes. If you’re comfortable with the concept, offering a conservative estimate of any projected inheritance gives your grown children an understanding of how much they need to save for themselves and for younger generations.
SageVest understands that your financial choices impact other family members. SageVest Wealth Management frequently facilitates intergenerational family discussions on a host of financial topics, always respecting your individual privacy and decisions. We would be happy to speak with you about your unique family objectives and how we can help. Please contact us to open a dialogue.