Six good reasons to discuss money with your adult children
You are quite possibly your child’s most important role model, so talking about your own financial journey can be extremely powerful. In a recent article, we explored the importance of discussing money with young children. Here, we look at reasons to be open about your finances with adult offspring.
Some parents like to focus on how they accumulated their assets rather than detailing what they have now. Others wish to fully involve their children in every aspect, especially if they have inheritance planning in mind, or feel they need support with managing their affairs.
At AJB Wealth, we often meet with two, or even three, generations of the same family.
‘Grandparents and older parents progress from accumulating assets to regarding themselves as stewards of the wider family’s wealth,’ explains Paul Willans of AJB Wealth in Hampshire. ‘As the tax burden rises, intergenerational family meetings are increasingly common and, often, the only interested party absent from the meeting is the taxman.’
Here are six reasons for talking about money with your adult children:
1. To help your children manage their own finances
Leading by example is probably the most effective parental tool for instilling good financial habits. However, without open discussion, children may not be aware of how you’ve built up your savings and investments over time. Similarly, it can also be valuable to talk about your mistakes.
Having transparent conversations will inform your children how to manage their own finances in a practical way. Mortgage and debt management, ISAs, pensions and investment are not necessarily covered at school, and children can benefit from your knowledge. Or at least, you can point them in the right direction.
What’s more, if you talk openly, they may come to you for financial advice when they need it.
2. To give your children peace of mind
It can be a relief for children to know that their parents are financially secure and can look forward to a comfortable future. Unpredictable long-term care costs can cause financial strain in many families. To a large extent, children will draw their own conclusions about your financial situation, but staying silent on the subject can be a source of anxiety for them.
3. For smoother inheritance planning
Estate planning is an important element of financial planning, but it’s a topic that many of us prefer to avoid. Affluent parents may worry that if their children expect to receive money in the future, this might be demotivating for them professionally. While you may not wish to make promises or mention figures, it can be helpful to talk about your general intentions.
Help children plan their own finances: The information may help your children plan for the future. It may even give them the courage to take a calculated risk involved in making a career change, starting a business, or even planning their own families.
An opportunity to voice opinions: A conversation also gives them a chance to voice their opinions. For example, they may wish you to pass money directly to their own children, or to nephews and nieces. It may also help give them realistic expectations.
Reduce the likelihood of disputes: Making your wishes known can also reduce the likelihood of disputes in the future. This may be especially relevant where you decide, for whatever reason, not to divide your estate equally between your offspring. Or if you are remarried.
Last year, it was reported that there were more than 10,000 applications to stop probate being granted in 2023 – some of which progress to a courtroom battle over the will. As family structures become more complicated, and the value of estates rises along with property prices, there has been a rise in such disputes.
Practical knowledge for the future: One or more of your children may be named as executors in your will. A full understanding of your intentions will make things easier when they come to administering your estate.
4. To enable your children to help you in the future
There may come a time when you need assistance with managing your affairs and it’s helpful to plan for this. If your children are familiar with your situation, they can step into this role more easily. It would also be helpful if they knew where to find important documents and other information in an emergency. If you haven’t done so already, you may wish to talk to a solicitor about executing a Lasting Power of Attorney.
5. So you can plan as a family
Being open about the future may also allow you to operate more efficiently as a family. Your adult children may consider aligning your financial planning strategy to their own. By including your children in the process, you can get them on board with your hopes. For example, if you would like the family to continue supporting a charity or to carry on with a family business.
6. To promote family unity
It will matter to children that you have trusted them with valuable information about your financial situation. Openness and honesty can strengthen relationships and generally promote family unity.
In conclusion
There are many reasons why discussing your finances with your children can be beneficial for both you and them. Not only might it help them make better financial decisions and enable the whole family to work more efficiently as a unit, but it also reduces the potential for conflict in the future and strengthens bonds.
AJB Wealth is well-placed to help you and your family with all aspects of financial planning and investment. To discuss your situation, please book an obligation-free meeting, or call us on 01428 774 070.
Important: The content of this bulletin is for general consideration only and does not constitute advice. No action must be taken, or refrained from being taken, without advice. This company accepts no responsibility for any loss occasioned as a result of any such action, or inaction. You are also reminded that investments can fall, as well as rise. And in the event of early encashment, you may receive less back than your original investment.
