But we do need to be more comfortable when it comes to talking about our finances with our families. No, we don’t need to disclose every little detail about what we make or what we owe, but there are plenty of times when avoiding conversations about money can lead to trouble down the road.
It helps to understand what topics need to be discussed, and what can be kept to yourself. And when you do enter a conversation on personal finances, you need to learn how to be truthful and honest when you talk to your family about money.
Whether its your kids or your parents, here are the money talks you should be having with your family and how to have them:
Your Kids Need to Understand Where Money Comes From
Understanding how families acquire money is a piece of knowledge that will serve as the foundation of your kids’ financial education. This helps them understand the value of a dollar and why it’s important.
Kids need to learn that money doesn’t grow on trees — or come from the ATM machine just because you asked it nicely to spit out some cash. Parents can teach this lesson by explaining money is earned in exchange for your time and your hard work.
You can drive the lesson home by creating a list of chores your kids can do in exchange for a set allowance each week. Allow them to manage their own money earned, and don’t provide them with spending money for nothing (in other words, if no work was completed, no cash is given). This helps to underline the point that money is a finite resource and that they have to prioritize their wants and needs based off their earnings.
You can help them understand the basics of good money management by suggesting they “invest” 50% of their allowance into a savings account at the bank that bears interest, save 25% in something like a piggy bank for big purchases they want to make, and allocate 25% for their discretionary, immediate spending.
This is also a great time to explain the importance of valuing experiences and relationships over material goods.
How to Talk to Your Family About Money Concerns
When you’re concerned about a family member’s spending habits, debt load, or other money matter, you need to approach the subject carefully. Even the best-intentioned advice may not go over well if the delivery is off.
Choose a relaxed, non-stressful time to talk about money. Make sure you have plenty of time to sit and talk — don’t try to squeeze in a conversation when you know someone will have to rush off to an appointment in an hour.
And don’t start your conversation with negativity and accusations. Even though you might be pointing out what’s true, you don’t want to immediately shut down your loved one by making them feel like they’re being attacked.
You don’t want to make demands, place blame, or give ultimatums, either. Remember, you’re trying to be helpful — not act superior, threatening, or just plain rude.
Explain that you’re simply concerned about the well-being of your family member, and that you want to help if you can. Don’t hesitate to share past mistakes you’ve made or lessons learned the hard way. Ask questions instead of forcing advice, and be prepared to listen to their responses.
You can’t force a family member to change, even if you know they’re making bad money mistakes. Don’t push the issue or get involved in a fight about finances. Try to avoid getting heated or emotional, and if you feel like you can’t steer the conversation away from that sort of ending, don’t engage by arguing or accusing.
Helping Parents Understand the Importance of End of Life Planning
Although talking about issues surrounding end of life or estate planning should be a conversation initiated by your parents, some people would rather avoid talking about the subject completely. It’s understandable; no one likes talking about death, even though it’s a reality we all have to face.
The same rules apply here as when you go to talk to a family member about a financial problem. You can’t demand that your parents take a particular action, and you should avoid placing blame.
As a son or daughter, you should make it clear that your intention is only to help your parents plan ahead so that financial issues are not in question in the future and everyone is less stressed. Explain that you want to talk about end of life planning issues so that you can ensure your parents’ wishes are understood and carried out.
Ask if they’ve considered long-term care insurance, if their retirement funds are secure, and if they’ve had wills and estate plans established. Be prepared to explain why these things are important and offer to help your parents get their affairs and finances in order if they’re not sure where to start.
Remember, any conversation you have with your family — regardless of who is involved with your talks — needs to be honest, straightforward, and transparent. Plan to talk when stress levels (including your own) are as low as possible, and be willing to back off if conversations become too emotional, anxious, or heated.
Have you ever had to talk with a family member about a difficult money situation? How did you handle it?
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