How to Break the Ice Around Family Finances

What’s the hardest thing to talk about? Death, religion, politics? Would it surprise you to know that one of the most difficult things to discuss is money? More than half of Americans say that they’re not comfortable talking about money with anyone—including their parents and romantic partners.¹

Perhaps this is because money represents more than a topic – it can represent control, power, embarrassment, insecurity, fear. For some people, the hesitation stems from a natural reluctance to confront their own mortality or their potential for future disability. For others, avoiding the reflects a belief that planning is associated with complicated—and expensive—legal and tax issues.

Silence Can Be Harmful

Avoiding these sometimes-difficult conversations about family finances can have detrimental outcomes and unexpected consequences for your family, such as:

Passing On Bad Habits - Talking to your children about money now can help them avoid mistakes in the future. The key is to talk about what money means to you and why you worked hard to achieve your success. It involves being open about the challenges and responsibilities that accompany wealth–including mistakes you may have made and what you might have wished you’d done differently when younger. And, most important, it’s about your values and what you wish for yourself and your children to accomplish with your privilege.

The conversation can serve as an empowering first step to forming a healthy relationship with wealth. It can also give potential heirs a framework from which to make future money decisions, so they’re not immediately using a windfall to make large purchases without thinking about their own long-term plan.

Lost Opportunities - It’s never too early for your children to understand the value of creating a wealth plan that takes family members’ needs into account. Family members should understand each other’s priorities around money-topics including long-term health care needs, charitable giving and generational gifting strategies. Taking the time to establish common goals is the first step in understanding how all members can participate in achieving them. 

But only about a quarter of those planning to leave an inheritance to their heirs feel that those heirs are well informed about the wealth that they’re receive.² Lack of communication can lead to misunderstandings and divergent objectives that could jeopardize your legacy and work against your values.

Costly Procrastination - Perhaps the hardest of conversations to have as an adult is with your aging parents. This is where the danger of putting off discussions of family finances grows exponentially. According to the U.S. Department of Health and Human services, 70% of people over 65 will require some long-term care at some point in their lives.³ Once a crisis hits, it’s often too late. Now is the time to make long-term health care plans and decide who will make financial decisions on your parents’ behalf if they lose the ability to safely handle their money. Proper planning gives you time to discuss your decisions with family members. This open communication can help reduce, if not eliminate, the risk of family discord, resentment, or conflict.

Align Your Goals with Strategies for Reaching Them

Morgan Stanley’s goals-based wealth planning framework strives to guard against more than just market volatility. We believe that a successful planning strategy must meet the following criteria:

1. Your plan should be customized to reflect what you care about most. It should address both the goals you hope to achieve and the risk of outliving your assets.

 

2. Your plan should address the shifting nature of issues and unknowns you face at different stages of your life and consider risks beyond market volatility, like inflation.

 

3. Your plan should seek to mitigate judgment and behavioral risks such as panic selling in difficult markets or overspending.

 

Smash the Taboo

We know it’s hard. Sitting down to discuss your parents’ long-term health needs or checking in with your siblings to see if you are all on the same page relating to any inheritance isn’t easy. What about your children; do they value the same causes that have moved you all your life? Is your spouse prepared should something happen to you?

The tough part is getting started, and that’s where bringing in your Financial Advisor can help. We understand that wealth is about much more than just money and can guide an open and honest conversation down those difficult paths to uncover the things that matter most to you and your family. We don’t believe in having a single conversation, but rather a series of talks that shift as your life changes. It’s a road. And you don’t have to travel it alone.

It starts with family but doesn’t have to end there. We are ready to provide the guidance, tools and information that can help you tackle these difficult topics and transform them into meaningful discussions for your future. Uncover what matters most to you and begin the conversation. Because the road starts here.

Footnotes

¹ Money and Relationship Survey, 2022,  https://www.financialeducatorscouncil.org/money-and-relationships/

² Cerulli & Associates, 2023 The Cerulli edge – U.S. Retail Investor Edition,  https://www.cerulli.com/press-releases/inheritance-discussions-are-worth-the-effort-for-advisors

³ U. S. Department of Health and Human Services, 2022 statistics, https://acl.gov/ltc