Benjamin Franklin famously said, "…in this world nothing can be said to be certain, except death and taxes." A corollary to this could be, "It's a certainty that families hate to talk about death and money."
Discussing money seems to be a challenging subject for even the most talkative families. A study showed that 44% of respondents found money the most challenging topic to talk about, more than religion or politics or even death. Yet, talking about money with others, especially family members, could help avoid significant financial problems.
Parents of adult children face two crucial money conversations – your money and their money.
Conversation One: Your Money
When talking to adult children about your money, the discussions may involve one or more of the following options:
- Assuring them that you have your current financial affairs in order
- Conversely, talking to them honestly if money is a problem
- Dealing with the financial support of adult children
- The financial plan for your estate after death
Showing Your Cards
Communicating your current financial status can be valuable as a way to avoid surprises in the future. It may not be so important if your situation is stable. In that case, it might only be a message that you feel confident everything is under control, and they need not worry.
In situations where you're experiencing money problems, letting your adult children in on your financial condition can make sense. As scary or embarrassing as it sounds, revealing your shaky financial cards could benefit both parties. Your children may be able to help in some way. At the very least, they will not be surprised if they need to become more involved in your financial affairs in an emergency.
The Money Faucet
The decision to financially support adult children balances your perception of their real need versus the need for them to experience life's hard knocks. This balance differs from family to family. External forces also come into play. The Pew Research Center reported that in 2020 the COVID-19 pandemic pushed the percentage of young adults living with their parents to 52%, a level not seen since the 1930's Depression.
If your adult child depends on you financially, make sure there are clear expectations established about that support. Setting a deadline for ending the support will help motivate different behavior. If your adult children lack knowledge about how to handle money, direct them to resources where they can learn how to manage their finances better. Online money managers like Mint, Personal Capital, or YNAB can be helpful not only as sources of information but also can provide tools to support positive financial habits.
What Comes After
One of the greatest gifts a parent can give their children is having a properly prepared will. This will save time as well as minimize cost and emotional stress in the future. However, simply preparing a will and any other related legal instrument like a trust does not finish the job. Your adult children need to know, at least at a high level, what they contain. Communicating this information while you are living allows time to clarify your intentions if questions arise. If adult children are not happy with your decisions, you will have a chance to explain your reasoning.
Despite best intentions, many find it difficult to talk about this important topic with their adult children. One way to gracefully get the discussion started is to choose a milestone event like a significant birthday or the passing of a friend. It will seem less awkward to broach the subject in such situations.
Conversation Two: Their Money
The first conversation about your money is essential. The second conversation about their money is optional, especially if your adult children are not financially dependent on you.
Passing along your hard-won financial knowledge may seem like a great idea, and your adult children may be open to hearing your words of wisdom. On the other hand, you may also get the proverbial rolling of the eyes response if the listeners perceive they already know it all.
The fact is, however, financial literacy among younger people tends to be low. A 2020 study found that only 18% of millennials (ages 18-37) could correctly answer three basic questions about saving and investing.
One way to help your adult children to learn more would be to suggest personal financial management tools like those mentioned above. Also, many popular personal finance books and web sites target young adults. For example, the Motley Fool website takes an irreverent approach to money matters that appeals to all knowledge levels.