When it comes to spending money on the fun or small stuff, financial discussions with your family probably come easy. Address one of life’s more serious topics, though, and the conversation may not flow as readily. To make fiscally responsible decisions that benefit the whole family, it’s necessary to have more serious money conversations occasionally.
Here are five critical financial talks to have with your family, with tips for making the exchanges successful and beneficial to everyone.
1. The Goals Talk
To live a fulfilling life, it’s essential that you and your partner share with each other what you hope to accomplish, both financially and in general. Many of life’s goals, like vacationing, buying or renovating a home and even choice of occupation, affect what you do (and don’t do) with your money. Knowing, for instance, that in five years, your spouse wants to quit her job and open an antique store will dictate how much money you save, spend and invest now.
Talking about how your goals jive with your partner is also essential. To have a fruitful conversation about goals, it’s a good idea to set some ground rules. Request that your partner listens to your goals and suggestions for attaining them without making any comments or criticisms. Once you are done, let your spouse do the same while you remain silent and listen. Afterward, discuss both of your goals and how you can come to a compromise if necessary to achieve them.
2. The Budget Shortfall Conversation
It would be nice if money always flowed freely, but that’s rarely the case. Most families experience ups and downs when it comes to finances, and some of the downs can be particularly low. When your family’s financial train is in jeopardy of derailing, you must face the problem head-on and talk as soon as possible to come up with an emergency plan of action.
Have the conversation in a relaxed setting when everyone is well-rested. Talking about your financial problems when nerves are on edge is likely to lead to an unproductive argument. Rather than being accusatory and resorting to “if only,” lay down the financial facts in a nonjudgmental, matter-of-fact manner. Stress that your goal is to come up with concrete solutions that you can quickly implement, such as ways to cut expenses or bring in more money.
3. Teaching The Kids About Finances
Once kids can converse with you, it’s time to start talking about finances. Considering how impressionable children can be, it’s best if they learn about handling money from you rather than from someone else. Because young attention spans tend to be short, make the quick lessons ones. Adolescents and teens can take in increasingly more information as they grow.
No matter your child’s age, make the experience enjoyable and educational. Every month, have a budget night when you discuss finances and then enjoy a favorite meal and a movie. During your conversations with your child, discuss subjects like setting and sticking to a budget, income alternatives (allowances, gifts from grandma, a job when your child is old enough) and savings. Teach older kids about checking accounts, credit cards and building credit and investment options.
When the time comes, have the “college talk” with your teenager. Discuss the various educational options and their costs, as well as ways of financing education. Make it clear how much money you will contribute to your child’s schooling and share the ramifications of taking on student loan debt.
4. Retirement Plans
Discussing your plans for retirement with your spouse is best done several years before the event. Preparing now allows you to make the best choices in terms of investments, your career moves and your current and long-term expenses. If you know, for instance, that you and your spouse would like to retire within the next 10 years, then that will dictate today’s spending.
To best be able to determine how much you will need for retirement, discuss with your spouse what the ideal retirement looks like for you both. Talk about where you want to live and what kind of lifestyle you’d like to lead. Do you want to travel? Buy a retirement home along the coast? Addressing these goals now allows you to plan for the transition financially and ensures that you both have the same idea of an enjoyable retirement.
5. Final Wishes Conversation
Quite possibly one of the most challenging and uncomfortable talks to have is the one in which you discuss what will happen in the event of your death or the death of your partner. Though it’s not a pleasant conversation, remind yourself that it would be much more unpleasant for your loved ones to suffer financially because you didn’t have your affairs in order, or failed to make your final wishes known before your passing.
Have the conversation in a relaxed and private setting, such as your home. Tackle questions regarding whether or not you have sufficient life insurance to cover expenses in the event of a death, who will care for the kids if you both pass away and what should be done if either of you is alive but physically unable to make decisions for yourselves. If you don’t have a regular and living will or a trust, now is the time to have one drawn up. Also, take the opportunity to make your final wishes known. For instance, if you have an absolute possession that you want to give to someone special, or if there is a specific type of funeral service you would like, make those wishes known now , before it is too late.
Though these discussions may seem overwhelming, tackling them will put your mind at ease so you can focus on creating a financially fulfilling life for you and your family. It may also make your family feel closer since you are discussing these big items as a team and getting everyone’s input and ideas. No matter how difficult the topic may seem to consider, some financial conversations cannot be avoided. Therefore, it is always best to be transparent, open and honest with the ones you love.
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.