Most people feel uncomfortable talking about their finances, especially with their closest loved ones and relatives. While this sort of discomfort is entirely natural, having a family money talk is one of the best ways to help ensure that children grow up to be financially literate, that your wishes are understood, and everyone is on the same page.
But what should you talk about? And to whom?
Whether you’re in a committed relationship, have children, or are just starting out on your own, sharing your budget is a great first step. As a couple, the budget you create should be one that is mutually agreed upon. If you have older children, sharing the budget — and explaining why you want to focus on it — can help them make better financial decisions in the future. Sharing your budget with parents and close relatives can also help you stay on track, as they’ll be the ones rooting you on from the sidelines.
Do you save 10% of your income? 20%? Do you want to save even more? Discussing this goal with your spouse, children, or even close relatives is a great way to open the gates of communication. With your partner, a clear savings strategy should be decided on together, possibly with the help of your financial planner. Sharing goals with children can also help them understand the value of long-term focus with their own money, and teach them how savings works overall.
If you’re building retirement savings or reaching retirement age — whether single, married, or recently divorced — it’s important that your family knows your goals. They should also be aware of your overall progress and accounts. If married, you and your spouse should have a clear outline of where your accounts are, what you’ve currently built up, and where you want to be by the age of retirement. If you’re single or newly divorced, opening up to close relatives or children about your goals is a great way to keep you motivated. It’s also a good idea for the future, in the event that you’re unable to make financial decisions for yourself.
Of course, juggling money and family relationships can be difficult. These conversations can also be difficult, especially if you’ve never had one before. But studies show that families who openly discuss money are less likely to have secret consumer debt, make fewer risky financial decisions, and have a better overall relationship with money.
So how can you start to open the doors of communication and build that family money talk muscle?
Discussions with your partner
If you’re in a committed relationship, newly married, or have been together for years, an open channel of communication towards money is critical. The best way to do this, we think, is to go with your spouse to financial planning appointments. Ladies especially can shy away from the financial “full picture,” even though they run the day-to-day budget. If you’ve been shying away from grasping your long-term strategy with money, start educating yourself. You never know; financial responsibility can fall into your lap at any time. You should always be on the same page.
Teaching your kids about money
Children learn the value of the dollar early, especially when connected to their responsibilities and rewards. One of the best ways to strengthen this “muscle” is to tie chores to their allowance. You can also encourage children to save for something specific, like a toy they really want. As they get older, maybe open a savings account for them. This way, they can see how, over a couple of years, the value of their money can increase. All of this snowballs into a transparent relationship with money that they can use as adults.
Don’t be shy; talk it out
If you’re like 18% of Americans who don’t talk to family about money (and we believe that number is much higher), it’s time to take a good hard look at why you’re not. For many, it’s fear of judgment and anger. But the best time to start talking about money is now; you’ll thank yourself down the road when you’re in better financial standing, your children make great money decisions, and you’re on the path toward a comfortable retirement.
If you’re not sure how to start the conversation, you can always reach out to our financial planning team at [email protected] to inquire about planning and management services.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through GWM Advisors, dba Toujours Planning, a registered investment advisor. GWM Advisors and Toujours Planning are separate entities from LPL Financial.