2nd December 2019
Do you talk to your family about money?
Historically, talking about money has been considered taboo.
The origins of the taboo aren’t entirely clear, maybe it was to avoid passionate arguments about how we all manage our finances differently, which is certainly the case and a considerable amount of literature exists aimed at helping people simply talk about money.
‘Emily Post’s Etiquette, 18th edition’ is a guide to manners in the modern world. Albeit aimed squarely at a US audience it splits topics of conversation into three tiers:
Tier 1 consists of the weather, entertainment, food, hobbies, sport and other small talk you’d use to break the ice with a stranger.
Tier 2 is for topics that people feel passionate about: politics, religion, relationships.
Tier 3 covers family and finance, and are typically conversations reserved for your nearest and dearest because they can invoke that passionate debate that only close family can understand and help you deal with.
The taboo, however wrongly, makes the discussion almost embarrassing or awkward to have – no matter its importance. And it’s that importance we want to look at a bit more closely.
If you have accumulated wealth, whether through inheritance, savings, a pension or through the sale of a business, it’s important to give equal weight to involving your whole family in your financial planning as you do thinking about your own future.
Often, children will know as little about their parent’s financial position as they do about their own future plans, so a certain amount of support and conversation is necessary to keep everybody ‘on board’.
By engaging in conversation and maintaining that channel of communication throughout the decades ahead, children can build, adapt and develop their own financial plans to take into account any inheritance or duties towards one day managing your estate.
When do you start talking to children about money?
The Money Advice Service claims that children can begin to build their attitudes and habits around money as early as five years old, and their views about money can be set by the age of seven, thus allowing a valuable window of opportunity to pass on your values and understanding through simply being open.
While the most complex finances a child will face might be the beginnings of regular pocket money and purchasing the occasional treat, the understanding of financial foundations will establish themselves, making more complex decisions easier to make later on.
Remember also that learning from mistakes can give children a powerful advantage, so allowing the financial freedom to make small errors in judgement can be very important.
The value of cross-generational finances
Getting the next generation involved can go beyond a simple awareness of your own financial behaviour and values. The ability to pool resources and help the next generation up the housing ladder, or through school, is becoming easier and more advantageous for all parties.
In fact, the whole idea of multi-generational financial planning is on the rise, aimed at helping you find the balance between your own retirement planning and creating a legacy that will make a valuable difference to your family. The impact of financial decisions can last more than a lifetime, and talking about financial planning across generations can have its challenges – as you would expect when tackling any taboo. The value in having those conversations cannot be overstated, and since there’s no time like the present, we believe it’s time to talk now for the benefit of all.