When to Bring Your Children Into Your Finances?
With summer winding down, I started thinking a lot about children and finances.
I know, what an odd connection. But during the summer, I see more children at Diversified as their parents come in for their financial check-ups. Recently, it happened twice in a day.
The first had their adorable eleven-year-old daughter sitting in our waiting room with headphones on, listening to her music. The other brought their two boys (a sophomore in high school and a 6th grader) into the actual check-up meeting.
This left me with a list of hypothetical questions: Who was right? When is the right time to bring your children into your personal finances? Is this too early or too late? Is there a time when we must bring our children into our finances? How do I bring it up to my adult children?
Let’s take a moment or two to discuss these questions and my thinking.
Who was right?
The “who was right” question can be a very tricky and situational answer. However, I will say they both are 100% right. Not because they did or did not bring their children into the room with them. Rather, because they brought their children to our office in the first place. The reality is much of our discussion is over their heads. What they do know, however, is their parents are taking time out of their busy schedules to sit down and discuss their finances with a professional. Their children know they take this seriously and seek guidance when needed. So I ask you, do you think these clients’ children will be more or less prepared than the children of others who do not have a financial advisor? It’s pretty likely that there will be some form of financial education talk on that car ride home. I’ve seen it first hand as these children of clients become clients of ours as soon as they get that first real job. They learn the importance of planning from an early age, which helps them to be prepared for their adult financial lives.
When is the right time to bring your children into your personal finances?
The answer is very subjective. It certainly depends on your children and your personal situation. I think this can be a slow education lesson from an early age.
Start with discussing at a high level what is going on with you and your spouse. Discuss the “why” and “why not” behind things you do with money. Let them see you bargain shop or not purchase something because it is too much money. Let them see you enjoy some reward, like a vacation, due to saving diligently throughout the year. At the end of the day, lead by example, as I’m sure much of your financial life was shaped by your parents. Don’t lose sight of that. As your little sponges (I say affectionately) absorb your wisdom, be purposeful in your words and actions about money. There is no right or wrong time to bring them into your finances, but always keep an open dialogue.
Is there a time when we must bring our children into our finances?
Is there a time when we must bring our adult children “up to speed” about our personal finances? The answer is yes! As you near retirement, if you haven’t already had this conversation it’s imperative you do. You see, your finances have the ability to impact your kids’ lives for better or worse. They may have to help you in your old age or deal with your estate when you’re gone. Your children are now at the age where they are doing their own planning and your plan most likely directly impacts them. What if mom and dad pass away or need elder care? How do they handle your affairs when that dreadful time comes? I’ve seen this play out one of two ways. Either their children are completely surprised or totally prepared. The majority of issues when handling mom and dad’s estate is when the children had no warning. Don’t let this mistake happen to you. If you haven’t already chatted with your adult children, do it now.
How do you bring it up to your adult children?
There are many approaches to bringing up your finances with your adult children. My favorite two are as follows. First, you can involve them in your review with your planner. This doesn’t mean every review, but it should be often enough. They could even be copied on the follow-up email from your check-up. Quite honestly, I’d handle it like you would with their health. You may not need to know every last detail, but at a high level, it’s important you understand where they stand. The second, less-intrusive way is to involve them in your estate and elder care plans.
Let them know what you want to do and that you’ve made arrangements. Have them know who is responsible for what in regards to health and handling your estate. Also, this gives them a bird’s eye view of your financial landscape. It’s less detailed and granular but gives them the bullet points of what they need to know for the both of you.
At the end of the day, it’s up to you how you handle your personal finances and how you engage your children about finances. I don’t think it’s ever too early to enlighten them. But, there is a time that is too late. If you are reading this and you know this conversation is way overdue, now is the time to do it. Or better yet, let us do it for you.