Money discussions do not always come very easy for most parents. According to global financial institution, Morgan Stanley, money is more than a topic – it can represent control, power, embarrassment, insecurity, and fear. Many hesitate because of a natural reluctance to confront their own mortality or their potential for future disability.
However, choosing to avoid the discussion can be harmful to your family. You may not believe that the children are ready for it, so you struggle with explaining to the children where you are financially and denying them the opportunity to be responsible as early as possible.
When you talk to your children about money you are showing them by example how to take control of their finances and be open when things go wrong. You are helping them avoid the mistakes that could arise in the future.
Start by giving them a view of what money means to you and why you believe it is necessary to work hard to earn it. By opening up you can then share direct experiences on the challenges and responsibility that come with controlling wealth. Do not forget to add what you may have done differently if you had another opportunity. It is an opportunity to share what your values for hard work are. That conversation can help them form a healthy relationship when it comes to money.
More than anything, you need your children to understand early enough the value of creating wealth that takes the family members’ needs into consideration. Morgan Stanley notes that 70 percent of families lose their wealth by the second generation. This is attributed majorly to lack of communication which can lead to misunderstandings and divergent objectives that could jeopardize your legacy and work against your values.
The money conversation, remember is for the rest of the family and this includes your aging parents. They probably were not very forthcoming with their finances. You as a parent should set a better example with your children by going to your aging parents for the discussion. Find out the much you can about their finances. You can determine if they have decided who makes financial decisions on their behalf in case they are incapacitated. Proper planning gives you time to discuss your decision with your family members and it also reduces the chances of family discord, resentment or conflict.
Morgan Stanley highlights three successful planning strategy such as ensuring your plan is customized to reflect what you care about most. It should address both the goals you hope to achieve and the risk of outliving your assets.
The second highlight is to have a plan that addresses the shifting nature of issues and “unknowns” you face at different stages of your life and consider risks beyond market volatility, like inflation.
The final thing is to seek a plan that mitigates judgement and behavioural risks such as panic selling in difficult markets or overspending.
