Why Talk to Family About Money?

Last week I was interviewed by The Canadian Press for a newswire article on several sites. The topic was, Why talk to family about money?

In preparation for the interview, I wrote down my thoughts about the reporter’s (Romina Maurino) questions.

Since her mention in the article was nice, but very brief, I thought I’d go ahead and share my thoughts with you in this post.

Why is it important to discuss finances with family?

Marital harmony is improved. A couple doesn’t form magically with marriage vows. Two separate, individual people learn to be a couple over time. Each one has had different money experiences and has different expectations about money. One may be a saver, the other likes to spend. One may be risk averse, the other ready to jump in with both feet. Talking about finances, over and over again, helps the individuals learn about each others money history and attitude and helps them work out what their couple money approach will be.

It helps you teach your children about money and the family’s values around it. Talking with your spouse about money and finances gives you the opportunity to explore the money values you want your children to learn, and to develop a common front to teach your children about money and those values. Talking as a family about money helps your children learn the facts and skills they will need to some day be out on their own and successful in managing their financial lives.

Money talks between generations helps asset transfers go more smoothly. Everyone knows that you should have an estate plan – a will, trust, and other documents expressing what you want done with your assets at your death. But, if you don’t talk about your intentions and the reasons behind them, there very well may be arguments when it comes time to execute them. Also, if you expect your children to handle your estate when you are gone, help them now by letting them know what to expect, what there is, where important documents are located and etc.

Talking about money helps family members develop more respect for each others viewpoints on personal finance. Family members at different stages of life have different needs and expectations around money. Understanding where a family member is in their life journey can help you understand why they are doing that thing (you know, the thing you don’t like) with the money. When children marry, external biology, experiences and values become part of your family. Talking with children and their spouses may help you understand, for instance, why the son-in-law whose Father and Grandfather died of heart attacks at age 35 seems to be a spendthrift. He doesn’t expect to live long, why save?

Exploring each others financial positions helps family members care for each other. Understanding member’s money attitude, approach and some basic knowledge of their financial circumstances can help you take care of each other. Knowing, for instance, that Aunt Jane is likely to give away any money given to her may help the family understand that to help Jane with her circumstances, an option other than passing dollars to her may be needed. Perhaps paying for the needed service, or giving things instead of money would be better for her in the long run. Knowing that Uncle John is dead broke, expects others to take car of him and will come to expect more if the family provides funding may be a signal that the family is enabling some undesirable behavior in Uncle John. It might be better in the long run if family members find a way to help John develop into a productive member of society, able to support himself.

What results have I seen after my family started having cross generation money talks?

Our adult children now understand why we want to give them part of our assets each year. We don’t want our hard earned money to go to the tax man when we die. Each year, we give some money to each adult family member. It pleases us to help them and helps move money out of our taxable estate. If we hadn’t explained and talked through why we wanted to gift them, they may have viewed it as an attempt to control their lives.

Seeing our family talk about money helped my daughter-in-law’s family begin to have their own discussions about their situations. Once our family started sharing our money attitudes and goals, it got talked about in other circles, making it easier for conversations to get started there.

We saw one of our adult children follow our example in setting up a trust. We talked through our trusts and explained why we had them in one of our first money discussions. A few years later, we found out that one of our sons had decided to set up a trust for his own beneficiaries.

We set goals together across generations and share our goals for the year. If we know where other family units are headed, we can understand and acknowledge their ability to help us or their need for help.

Talking about finances made our annual family meeting a bit easier. In our very first family meeting, we used a set of questions from an estate planning book to help us figure out our money personality. Each person answered the questions, then talked about them with their spouse and then we talked as a whole group. It was hard, but it helped clear the way for future conversations.

My overall thoughts on having money talks with family members.

Opening up money discussions helps you prepare your heirs for any legacy (financial or not) you want to leave them when you die. A two way conversation helps you understand their money approach and them understand what you are doing and why. They can use the knowledge of ‘maybe someday I will get xyz’ to help them plan their here and now.  You as estate planner will get valuable feedback from your future heirs.  Maybe one of them doesn’t want what you plan to leave, but another does.  You can adjust your plans accordingly.

Financial discussions should be part of every premarital counseling effort. Money causes a lot of issues in marriages. Talking about money, money personalities, money approaches, traditions and attitudes before you get hitched helps you get to know your future spouse better and paves the way for continuing money discussions after you marry. Besides, don’t you deserve to know what debts or assets the other person is bringing to the marriage?

Your family needs to prepare before starting to have financial discussions. If you haven’t ever talked about money in your family or extended family, the thought of doing so can be intimidating. You may fear that starting to talk about money will cause misunderstandings about your intents and rifts in your family relationships. The key to alleviating these concerns is to prepare yourself and your family, to discuss your desire to start having the discussions and express your reasons for wanting to do so. You also need to be open to listening to (and possibly answering) other family member’s objections or concerns. Sign up for our newsletter and get a free checklist to start having family meetings – it includes many ideas to help you prepare for money talks.

Families need to explore all options to a given situation, not just assume they have to throw money at it. They must do this with the values and wishes of the person at the center of the situation in mind.

The older members of the family should be the ones initiating the money talks. It may be easier for them to do. Often, they are in the most comfortable financial position and have a lot of experience with money. They are also the most likely to need to talk about their estate plans.

Start young and share financial information with your children at appropriate ages. If kids are used to having logical and valuable discussions about money and finances as part of growing up, they will consider it an appropriate and natural action. If you wait until your kids are grown, it becomes more difficult to initiate those discussions.

Don’t demand information, lecture on the proper thing to do with money or question the actions or motives of other family members. Start slowly and in generalities – let family members volunteer information instead of trying to solicit it – if the situation at hand needs the information.

Do you and your family members have formal or informal money discussions? How did you begin?  Why do you think it is important to have those money talks?