Share your financial plan with progeny

Image by Brandi Day from Pixabay

By Joe Vietri
Posted on June 07, 2019

As my children grow older, I grapple with a mix of emotions — some sadness and nostalgia for when they were small enough to sit on my lap, but above all, excitement for them to learn and experience life on their own.

Both of my sons are in college now, and a large part of the transition they are making to adulthood is related to how they engage with and take responsibility for their finances.

As a second-generation financial professional (like me, my father also worked at Charles Schwab), my wife and I have talked with our sons about saving and investing since they were young — including a lot of discussions about our financial plans for their college educations.

Over time, the conversations have evolved, and a few months ago, my wife and I talked with our sons about our long-term financial plan — that Dad wants to retire eventually and we’re both looking forward to the opportunity to spend more time on other things we are passionate about.

How to get started

If you’re feeling unsure how to get started with conversations like this, you’re not alone. In fact, according to Schwab’s 2017 Modern Wealth survey, 58% of Americans would rather talk about politics than finances with their friends and family.

But it’s important to take the opportunity to start a conversation about money with your family. Keeping those closest to us in the dark about financial matters is almost always a mistake, especially as we get older, and estate and retirement planning become more immediate financial concerns.

If your children are young, Schwab MoneyWise.com has some great ideas and resources for talking with kids about money. If your children are grown, consider starting a conversation about these three critical topics:

Retirement goals

For most people, retirement is an exciting time but also a time of significant transition, and it’s important to be as transparent as possible about your plans and circumstances with your family.

Do you plan on spending everything in your retirement accounts, or should your children expect a modest inheritance? Conversely, are you worried about being able to retire or needing financial help later in life?

The answers to these questions may impact your children’s lives, and it is important as parents to prepare children to make informed financial decisions.

Debt

Debt is an uncomfortable topic, but it directly informs the rest of any financial conversation. A study in 2018 found that 68% of American households headed by someone 55 or older currently hold debt. That’s more than two-thirds of Americans nearing retirement age.

It’s important to explain to your children the entirety of your liabilities — and to explain the types of debt you have as well — to give them a full understanding of your financial picture.

Estate planning

The estate planning conversation can be a tough one to begin, but it’s critical that everyone — regardless of assets — draft an estate plan and share it with their children.

Conversations about beneficiaries (i.e., who will inherit what), medical directives (i.e., how you want to be cared for if you can no longer make medical decisions) and powers of attorney (for financial and other decisions) may be daunting, but not having the conversation leaves your children ill-prepared for these challenging situations.

If you are in a position to leave a legacy for your children, it’s also smart to discuss steps for money preservation and transfer, such as trusts and asset titling.

And finally, you should let your children know where important paperwork and records are kept.

Open, honest dialogue is crucial. If you need help, consider reaching out to a financial consultant. A candid conversation with a knowledgeable outside party may be just what is needed to help you organize your thoughts for these important conversations with loved ones.

Joe Vietri is a branch network leader at Charles Schwab. This article presents his views, not those of the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.