It’s time for The Talk.
Take a deep breath. You can handle this. We aren’t referring to that talk. It’s time for the other talk – the money talk. And it’s not just for your kids.
Money can be an emotionally charged subject, because everyone sees it differently. For some, it represents freedom; for others, bondage. Many people have a love/hate relationship with it, and others are simply clueless about how money works. It’s been noted that the millennial generation “are more financially prepared for the things that lie ahead”, and they are having financial conversations with both their children and their aging parents. They realize that financial literacy is an important topic, and they are repealing the preceding generation’s taboo around talking about money.
But still…talking about money can be touchy. So how do you start the conversation? Follow these guidelines and you are likely to experience a much more satisfactory outcome.
Know what you want to say, and write it down ahead of time. Having your main points handy can help prevent you from following a tangent or becoming distracted by emotion. Also, if you are aware of objections you may encounter, write down some responses in advance. Avoid blame and judgment, and try to stick to the facts. Try to understand the mindset of the other person. If they view money as a means of instant gratification, but you have a longer range view, realize that there will be a difference of opinion, but that doesn’t make either one of you wrong.
Avoid starting the money conversation at the dinner table, and don’t combine it with another activity. You want to ensure that you are clearly heard and understood, especially if teens are involved in the discussion.
Teach Your Children Well
It’s never too early to begin educating your children about how to handle money. Age appropriate lessons are all around us. When visiting the market, give them a short list of familiar items, such as ketchup, yogurt, crackers, etc. Ask them to find the items with the lowest prices. Aside from teaching them about the cost of groceries, it also keeps them occupied!
Another valuable lesson is spend/save/give. When a child receives money, instead of allowing them to spend it all at the toy store help them divide it up according to this formula: 50% for spending now, 40% for saving, and 10% for giving. The giving should be defined by the parent and child together. Religious institutions, medical causes, disaster relief, animal shelters – whatever motivates the child or incites empathy or compassion is a good choice.
Be Familiar With Your Parents Financial Situation
As parents age, adult children often move into the role of caregiver. This frequently includes assisting with financial transactions, which can be challenging. Elders can be resistant to changing social norms, such as discussing finances with their children, which simply wasn’t done “back in the day”. Josh Palmer, a certified financial planner, says, “Hiring a financial advisor can make the process less personal and much easier. I often have a meeting with the parents first.” He then requests permission to share the information with the children. This relieves the children of having to ask the parents directly, which may be seen as out of line, or even threatening, by some seniors.
If medical necessity forces the issue, an attorney that specializes in estate planning can be very helpful in gathering information about a senior’s assets. The attorney will consult with them every step of the way (as appropriate with regard to their medical condition) to ensure that their wishes for disposition are recorded and followed. Again, involving a neutral third party takes the pressure off the adult children.
Be a Friend, not an ATM
If you are approached by a relative or friend for a loan, think hard before opening your wallet. Most people incur unforeseen expenses on occasion; that’s just part of life. But if the person requesting the loan has a history of asking for handouts, steer clear. The emotional tug will be strong and difficult to resist. But Palmer warns, “Never loan money that you will need in the foreseeable future.” In other words, if you can’t afford to lose it, don’t loan it.
Instead, offer to help set up a budget and show the person how to organize and maintain their finances. If that is not a viable option for you, offer to accompany them to a debt counselor or financial advisor.
If You Need to Borrow, Have a Repayment Plan
Approaching a loved one for a loan can be a humbling experience, but you are more likely to repay the debt, and protect the relationship, if you present a repayment plan along with your loan request. The easiest method to demonstrate your commitment is to set up a monthly recurring transfer from your checking account. Having an automatic payment in place can prevent an awkward conversation if you forget to mail a check.
Since people have very different ideas and goals for their money, discussing the subject may never be easy. However, if you go into the situation prepared, with a clear outcome in mind, you are far less likely to be a victim of emotion, and far more apt to accomplish your goal. So if it’s time for the talk, you are ready to start that conversation. As for the birds and the bees – you are on your own!