How to Talk Money With Family

The term “personal finances” is a bit of a misnomer. Not only do your finances affect you and your spouse, but also the family members (and sometimes friends) around you. This is true if you have young children, adult children, or extended family. To be fully financially secure, it’s crucial to understand how other people in your life can influence your spending, savings, and investing.

Setting financial expectations with your kids

Having personal finance talks with your kids is essential at all stages of their lives — when they’re young and just starting to learn about money, when they’re college-bound, and even when they become adults. Why? Because money affects everyone around you.

A recent report from the Pew Research Center found that fewer than half of adults under 30 say they are completely financially dependent on their parents. There are many good reasons why adult children are staying financially dependent on their parents for longer: expensive housing, college debt, and low-wage jobs. For parents who can afford it and don’t mind it, this can be a viable solution. But for so many who can’t, this creates problems for children and parents alike.

Personal finance expert Manisha Thakor believes that part of the problem lies in non-systemic issues, namely the relationship between parents and children, and what one expects from the other. In many cases, parents are subsidizing their kids’ lifestyles earlier than they can afford.

For example, when Thakor’s parents first married, they used boxes for side tables and decorated them with contact paper. They didn’t expect to have nice things until later in life. However, this is no longer the case with today’s generation.

The most actionable step that parents can take with family finances is to be okay with saying no. It’s healthy, and it’s acceptable. What’s not healthy is subsidizing your kids’ lifestyles at the expense of your retirement.

Communicating college costs

One of the most significant financial factors of having kids is the prospect of putting them through college. Average four-year college tuition costs for the 2024 school year range from $11,610 to $43,350, while the total cost of attendance ranges from $29,910 to $62,990 per year.

No matter your wealth, that number is painful. It’s coming out of your paycheck, your investment portfolio, a 529 plan, or being financed through debt. And to make matters worse, more than half of older Millennials feel that their student loan debt just wasn’t worth it.

College is roughly the equivalent of a mortgage — or two mortgages, in some cases. In 1992, the average student loan burden was $8,000. For those graduating in 2024, the average is more than $30,000.

The weight of this financial decision requires multiple conversations, and the earlier, the better.

Kids need to understand the enormity of college costs early in their journey. This is a crucial step in helping your kids navigate the relationship between the cost of college, the right degree to pursue, and the type of job they want. It’s easier said than done, of course, because many parents aren’t trained to have this conversation.

For help starting and having this conversation, your financial advisor can sit down with you and your child, walk through the costs, show them how valuable an education is, and explain their responsibilities upon graduation if they have student loan debt.

Planning for your parents’ future

Older Millennials are increasingly stepping in to help their sandwich generation parents. These are the same parents who were simultaneously raising their own children while also caring for their aging parents. The cycle continues: now that the parents are reaching their senior years, they’re relying on their Millennial children for aid.

To further complicate matters, many older adults face unique financial challenges that their adult children may not recognize until the damage is done. For example, many Millennials who have lost parents due to COVID-19 are finding that their parents had no estate plan or financial plan. They weren’t prepared. Another consideration is the potential for fraud that targets seniors because they’re more vulnerable.

The challenge for adult kids is that trying to protect their parents’ finances from fraud or suggesting things like estate planning can often lead to fights. Older parents want to be treated with respect and dignity. They don’t want to feel like they’re giving up control, even if giving up things like managing their finances can later help their children when they pass.

To overcome these challenges and avoid conflict, it’s a good idea to remind your aging parents they’re still in the driver’s seat and that you’re there to help. This might mean canceling identity theft protection and helping them monitor their credit score to protect against fraud, or it could mean knowing the specifics of their estate plan (and whether they have one at all).

This is where a financial advisor can play a huge role. Your advisor can do so much more than pick stocks and manage money. Getting them involved in these conversations with your parents can help you all identify where you might need the most help.

Planning for your financial future

As we’ve covered throughout this series, personal financial well-being isn’t just personal. It’s about understanding your current financial situation, planning for the future, and communicating expectations with those who may affect your short- and long-term financial plans.

Are you ready to have these essential conversations with your family? Lean on our team to help you navigate the crossroads of life and wealth.

This content is for informational and educational purposes only and should not be construed as individualized advice. For individualized advice tailored to your specific circumstances, please consult with your adviser.