Money has long been a taboo subject. In fact, a study from Lending Club found that people will happily share details about everything from their vacations to health issues and marital challenges, but remain mum when it comes to dishing about finances. But openly talking about money issues is key to establishing security over the long term for your family and should ultimately reduce stress. Here are some of the topics experts say families should make a point to discuss.
Newly-married couples are often planning for the future, which makes it an ideal time to openly discuss finances. “New families and newly married couples should be having discussions about long-term goals, whether they’re saving for a home, establishing preliminary retirement plans, or just general spending habits,” says Russell Rivera of Voice Wealth Management. “Ideally, some of these discussions should be had before getting married, but some people wait, even when it comes to having the discussion about how or whether to merge finances.”
The youngest members of a family are often left out of money discussions. But they too should be included in certain conversations, says Russell Rivera of Voice Wealth Management. “Families with young children should be discussing how parents get money and the decision making that goes along with it,” says Rivera. “Young kids most often see us spending money by handing over a plastic card, or don’t even see it at all as we increasingly buy products over the internet for delivery.” Talk to kids about what money is and how it’s earned.
One financial topic families should be honest about is the challenge of making ends meet, particularly when one of the key breadwinners has lost a job or is otherwise struggling. “You can’t just tell your spouse or children there won’t be a summer vacation this year,” says David Bakke of Money Crashers. “Be honest and upfront about the challenge and let everyone know that some cutting back will be in order, along with a projected timeframe for how long you think things will last.”
While it may not be fun to tell your young children they need to start saving, it’s a key discussion to have, says Micah Klug, owner of the website Home Faith Family and mother of four. “One of the primary financial talks we have [with our kids] includes stressing the need for them to start saving today. College tuition is becoming expensive, and is climbing. Extracurricular activities are pricey, and if children want to participate in these activities then they need to be willing to help cover most (or all) the cost.”
The proceeds from life insurance can provide a financial safety net for loved ones. “The payout from a policy can provide a financial safety net that helps loved ones pay for expenses such as a mortgage, childcare, and many of the other day-to-day bills families share,” says Yaron Ben-Zvi, CEO of online life insurance agency Haven Life. “Life insurance can be uncomfortable to discuss because you have to consider ‘What’s the worst-case scenario?’ But most people would agree that without a financial cushion from life insurance, their family might face a dire money situation."
One topic families frequently avoid is how parents plan on paying for their own long-term care. “Far too often adult children assume that their parents have already made provisions to pay for care, then find out the hard way that the money well has run dry,” says Joy Loverde, author of Who Will Take Care of Me When I’m Old?
One of the most important money issues that people fail to talk about is writing a will, says Tim Hewson, president of U.S. LegalWills. “Most parents don’t have a will, and there are some very good reasons for this. The traditional will writing process is inconvenient; and often requires booking an appointment with an attorney during office hours with both parents in attendance and making arrangements for the care of the child during this time. It simply never makes it to the top of the to-do list.” The cost of taking time off and hiring a lawyer to draft a will — anywhere from $150 to $1,000 — can also seem prohibitive for many young families, and is therefore not prioritized despite its importance.
As family estates are passed from one generation to the next, the responsibility of managing those estates is also passed down. It’s important to discuss with your children or other family members who will be designated a trustee and who might not be. “Nothing is worse [for someone] than finding out after a parent has passed that they won’t be involved in handling the settlement of their estate,” says Scott Stevens of California Wealth Transitions. “The people who are involved shouldn’t be in the difficult position of handling the explanation of why they are in charge of settling an estate. The parents’ decision should be transparent to all.”
While not directly tied to money, end of life wishes are another uncomfortable but key topic. “A lot of times kids are totally incorrect or in the dark on their parents’ wishes when it comes to how they want medical decisions to be made in the later stages of life,” said Scott Stevens, a financial advisor with California Wealth Transitions. “It is sometimes very difficult for children to let go of parents on life support, but following parents’ wishes should be paramount. Explaining this selection and why should also be a transparent exercise.”
The individual designated to be power of attorney has the authority to make decisions on your behalf, explains Danielle Kunkle Roberts, co-founder of Boomer Benefits. “Don’t wait for your health to go awry before you decide who to designate as your POA.” Make sure you choose someone who will honor your wishes both financially and medically, she adds. To avoid any confusion about who you’ve chosen, designate your power of attorney in writing with legal documentation.
Are you planning on leaving money to your children? It may make sense to discuss that in advance, says Russell Rivera of Voice Wealth Management. “While you’re always able to change your will or any beneficiaries on your accounts, having these discussions, especially if they are separate from just splitting it evenly, can avoid family strife and legal issues after death in case one beneficiary wants to contest the will or trust for whatever reason.”
Have charities and charitable giving been a big part of your life? Do you want that to continue? Will you create a separate trust that distributes money to those charities upon your death? “All of these are good questions to ask and should be shared with children,” says Scott Stevens of California Wealth Transitions. “We don’t like it when children are caught off guard that a small or large percentage of assets may not be available to surviving family members.”
While on the topic of who will inherit what, it may also be a good idea to discuss what you hope your descendants will do with the money being left to them. That talk could include what the money means to you, how you may envision the inheritor using it, or how the inheritor envisions they'll use it, says Levi Sanchez, a CFP and co-founder of XY Planning Network. “Without any line of communication, the inheritor could be shocked when they actually inherit the money, could spend it out of line with how the person gifting the money intended, or worse.”
Discussing where important financial documents are kept is something families tend to overlook. “Discuss where your estate documents like a will or health care proxy is kept,” says Russell Rivera of Voice Wealth Management. “If you have a safe deposit box, tell your family how to access it in case of your inability to do so.”
People’s homes are their largest financial asset, making it an important family money issue to discuss, says John Bodrozic, co-founder of Homezada. “Most people completely ignore the financial impact that their home has on their money issues,” says Bodrozic. It’s important to track the estimated value of your home and the remaining balance on your mortgage so that you can be clear with family members about what equity there may be in the house which could be used for a home equity loan.
Homeowners should be open about the total cost of ownership so that descendants are prepared. “Most people think of the big things, like the mortgage and home insurance costs. But you also need to track property taxes, utilities, and other basic home services,” says John Bodrozic of Homezada. Don’t overlook annual maintenance and repair costs.
There are several ways to pass wealth on to future generations. “If the wealth is great, then it could be in many forms: all at once, percentages at certain age milestones, or monthly distributions (spendthrift trusts for those that may be bad with money),” says Scott Stevens of California Wealth Transitions.
Business owners have a particular burden when it comes to money discussions. “If you own a business, that's definitely a topic with many financial ramifications that you should discuss with your family,” says Priyanka Prakash, finance expert at Fundera. “You should begin with an open discussion about whether to keep the business in the family in the event that you pass away or become incapacitated.” Some spouses and children don't want to become entrepreneurs, adds Prakash, and would rather sell the business to a third party and just receive fair compensation for their share. However, in some families, there may be a desire to hand over the family business to future generations.