How to Talk to Your Parents About Money

As families come together for the holidays, the last thing anyone may be thinking is, “Gee, I should talk to my folks about their financial situation!” But with busy lives, these gatherings may be a good time to at least broach the topic and to schedule a future date to conduct the dreaded, but necessary “Money Talk”. I hear your groans and you are not alone in your struggle to have these difficult financial conversations. According to a recent survey by Fidelity Investments, while three-quarters of adult children and their parents agreed that it is important to have frank conversations about money, nearly two-thirds disagree about the right timing for these conversations to occur. Parents would prefer to wait until after retirement, while their adult children want these conversations to happen well before their parents retire or experience health issues.

These timing issues seem to mask the larger problem: the “Money Talk” often invokes feelings of control (or lack thereof), privacy and dignity for the older generation. And for the adult child, it is hard to balance being responsible, while not seeming like you are prying. (For those who tell me their parents are “fine”, even if your loved ones appear to be financially self-sufficient, neurologists say that cognitive ability starts sliding as early as 60 and regulators warn that older Americans are the biggest targets of financial scams!)

All of these factors mean that it makes sense to have the money conversation when it is timely. For example, year-end is often a period when we look back and review how we have done financially. This could be an opportunity for you to ask your parents about their CD rates or portfolio performance. You may want to offer reviewing their situation with an impartial financial professional, like a Certified Financial Planner, or a CPA.

Early conversations do not have to be a forensic accounting of every last nickel of your parents' finances, but you need to explain that an open dialogue will help them feel more in control and allow you to be prepared, in case of an emergency. Once that conversation gets rolling, you can move into other important areas, like cash flow and bill paying, retirement income and the big elephant in the room, estate planning.

The good news is that Fidelity’s survey found that 93 percent of parents who have had discussions with their children about estate planning say it brought them greater peace of mind and 73 percent said it would help their children’s emotional state of mind when the time came. How can you start? Experts suggest that you frame the issue in a way that talks about your worries, rather than indicting your parents for being disorganized messes. “I just want to make sure that I carry out your wishes.”

During this conversation, you are trying to discover whether your parents have created or updated their wills, powers of attorney and health care proxies. If not, encourage them to schedule an appointment with an estate attorney. You can offer to attend the meeting, but only if they want you there. Emphasize that this is an opportunity for them to make their own decisions and to make their wishes known. One important note: Your parents may choose to do something that you don't like. Unless it is dangerous to their well-being, try not to argue for a different outcome. Keep notes of these conversations, especially if you have siblings. There are far too many stories about relatives who become estranged as a result of end of life financial decisions.

Finally, you can only do what you can do. If your parents simply shut down or refuse to talk to you about their money, don’t fight it. They may not want to talk today, but at least they know that the door is open.

How to talk to Kids/Parents About Money

Friend: “My daughter is graduating from college, so I guess it’s time for ‘the talk.’” Jill: “Didn’t you do that when she went away?”

Friend: “Not THAT talk, the MONEY talk!”

Why is it so hard for some families to have tough conversations about money? The answer is obvious: Because financial matters are often weighed down by emotional baggage. That’s why it can be so hard to talk to both your kids and your parents about something that should be quite easy.

Let’s start with the kids. Since it’s graduation season, it’s an ideal time for parents begin the conversation, especially if your child is graduating with student loans. Your role as financial advice-giver should begin with laying out a strategy to attack the debt. Depending on their circumstances, your son or daughter may want to consider deferment, consolidation and/or income-based repayment plans that are offered through the government. There is a lot of valuable information at studentaid.ed.gov.

Even if there are no loans, the sooner that we encourage our kids to pay attention to their money habits, the better off everyone will be. The first step is to track how they are spending money. With that information, they can create an emergency reserve fund that can cover six to 12 twelve months’ worth of living expenses. And of course, encourage those recent grads with jobs to start contributing to retirement accounts, at least up to the company-match levels.

You should explain to your kids the importance of establishing and maintaining good credit. If you have so-signed on a credit card during the college years, it’s time to let the kids fly solo. To get started, encourage them to use a secured credit card, which is a great way to begin the process, without the liability of them racking up credit card bills. Remember that debit cards may be useful in managing cash flow, but they do nothing towards building credit.

Since you are already having the tough money talk with the kids, it’s also a great opportunity to talk to aging parents about their financial situation. Now this is a bit thornier, because you will be in full-blown role reversal. Unlike the talk with your kids, your parents may be more reluctant to have the conversation.

Remember that you are trying to open a dialogue to ensure that your parents know they can talk openly and honestly with you about what’s going on in their financial lives. Emphasize that this is an opportunity for them to make their own decisions and to make their wishes known.

The areas that you should be discussing include: cash flow (do they have sufficient income to maintain their lifestyle? Are they dipping into investments and savings to fund the gap between Social Security and needs?); estate planning (do they have current documents? Where are the originals? What is the name/contact information of the attorney who drafted the documents?); investments (Who is managing? Are they comfortable with risk level?); and insurance (Where are the policies kept?).

If your parents seem reluctant to reveal details, don’t push them, but say something like, “If you don’t want to talk to me about this, I understand, but you should consider seeking advice from a third party, like an estate attorney, a Certified Financial Planner or a CPA.” Before you send them down this path, be sure to remind them how financial salespeople can be very convincing. Tell them to talk to you or to get a second opinion before purchasing any financial product, or opening new accounts, or offer to receive duplicate statements sent to your address to make sure your parents are buying suitable investments.

Finally, you can only do what you can do. If your parents simply shut down or refuse to talk to you about their money, don’t fight it. They may not want to talk today, but at least they know that the door is open.