It’s time for “the talk.”
Yes, it’s time to get past your feelings of awkwardness and fears of uncomfortable silence, and sit your family down for a frank discussion… of your finances.
Granted, money conversations with your family might not be fun, but they sure beat money worries that can arise by skipping the talk. There are many important discussions when it comes to your family finances, so this article introduces just one key money matter you can use to get the conversation started with the appropriate members. If it’s been a while since you’ve broached these subjects – or if you’ve never even considered bringing them up – put this on your to-do list ASAP.
Talking with Your Spouse
If you’re married, perhaps the most important place to start is with your spouse. Many experts point to financial woes as a main reason for divorce. Clearing the air and aligning (or re-aligning) your financial strategy with your partner’s can go a long way in maintaining a lasting relationship.
What to ask to get the conversation started: “Are we living above our means?”
Over the years, priorities will likely change as your family situation changes. You and your spouse might pile on debt if you’re not regularly checking-and-balancing each other to stay within your budget. (Don’t have a household budget? Set up a quick spreadsheet, or look into an app you can track on your phone.) If you’re a saver and your spouse is a spender (or vice-versa), you need to work out a compromise once and for all that doesn’t find one of you scrimping your pennies while the other fritters them away. Even if you both seem to be on the same page when it comes to shelling out the dough, you should hold regular check-ins with each other to make sure your financial picture continues to be rosy.
Consider a month-long spending journal, in which both of you will track every expense, from your most inconsequential pack of gum to your latest Maserati. The keys are that BOTH of you must participate wholly, and EVERY expense must be included. At the end of each month, compare notes and discuss inconsistencies.
Talking with Your Parents
Depending on your age, you might be facing something of a role reversal: Your parents now look to you for support, financial or otherwise. Regardless of their situation, you can provide such support by encouraging them to consider their financial reality. The result can be eye-opening – for them and for you.
What to ask to get the conversation started: “How’s your retirement savings account?”
As life expectancy continues to climb, so does the likelihood that many of our parents (heck, even many of us!) will outlive retirement savings. Even the most prudent savers might encounter hardship due to market fluctuations and changes in policies over the years. Inquire if they are working with a financial advisor – or if not, guide them to one of many online retirement calculators – to track whether their savings progress has been appropriate or whether they need more assistance to make sure their expenses in retirement will continue to be covered.
While you’re at it, be sure you know who they’ve named as their will executor and who has their power of attorney. That person will be in control of their retirement savings, with the authority to make financial and legal decisions on their behalf should anything prevent your parents from being able to personally facilitate their wishes. Most importantly, verify with them that they’ve completed all the necessary legal documents and that their official documents are all up-to-date – and make sure you know exactly where they keep their originals, along with any keys or passwords necessary to access them. (And it goes without saying that if your parents DON’T have a will, your first step is to help them get one!)
Talking with Your Children
There are a few financial discussions you and your kids should be having that can really help curb the expenses – or at least teach them to be more aware of money issues.
What to ask to get the conversation started: “Are you responsible enough for a credit card?”
In our credit-crazed economy, you might be tempted to shield your kids from the plastic for as long as possible. But this credit-crazy economy is the very reason why you need to teach them how to use credit prudently. Think about how many credit card offers appear in your mailbox each week. You need to teach your kids about responsible credit card use BEFORE they start receiving these offers personally.
As a first step, try adding your young teen as an authorized user on your account, with a $50 or $100 limit. Be sure they know when payment is due: Have them reimburse you with cash from their allowance or their after-school job at Subway. If they don’t lose the card, max out their limit, or make “late payments,” you can negotiate an increase on their limit. By giving them more power over their purchases, they will hopefully get a stronger sense of what things cost, what it means to have a budget, and how credit cards work. (Although in the early days, you should probably gloss over interest charges, minimum monthly payments, and credit score… save those topics for a more mature audience.)
Bringing up sensitive topics with family can certainly be awkward. If you’ve tried some of these suggestions – or you just don’t think any of them are appropriate within your particular family circle – don’t hesitate to reach out to the friendly folks at American Credit Foundation. We’ve had more than our share of tricky conversations, and we’ll help you get yours started.