There always seems to be discussion about communication gaps between parents and their children. It isn’t always easy for parents to get important messages across to their children, and how they should handle their money is a big one. For most parents, discussions about money don’t really begin until adolescence and then more so into their teenage years, but it’s important for adults to talk to their children about finances, even when they are still young. Obviously, once they have matured and get closer to adulthood, it’s absolutely imperative to discuss handling money and ways to ensure a strong financial future.
Fidelity Investments recently surveyed two groups of people:
- Parents aged 55 years old or older, that had a $100,000/yr average income and nearly $530,000 in assets.
- These parents’ adult children. The children had to be at least 30 years old, averaged closer to $127,000 a year, but there assets were far less – averaging only about $80,000 in assets.
When the adult children were asked their opinions of how their parents handled their money, they were extremely positive – indicating that they had excellent skills managing finances and various investments. However, this opinion didn’t positively correlate in the other direction – parent’s opinions of how their children managed their money was a lot more negative. Thirty-six percent of the parents in the survey indicated that their children didn’t put enough money away for emergencies. Thirty-eight percent stated that their children hadn’t begun saving for their retirement early enough in life (which age parents thought was early enough was not specified, however). Perhaps most significantly, forty-two percent of parents surveyed indicated that their adult children had too much debt.
Other findings showing a communication gap – or certainly at least a difference of opinion between parents and their children were of note. When the adult children were asked if they would be able to financially take care of their parents as they aged or if they became ill, the children said yes, whereas the parents stated they wouldn’t need any assistance. One may chalk this up to stubborn parents and caring children, but it goes a bit deeper than this. The adult children also underestimated their parents’ assets on average by more than $100,000 – thus indicating that the parents might need financial assistance after all as they aged or if they were to become ill.
This ties into the larger overall notion about children providing for their parents financially in general as they age. Ninety-seven percent of parents polled indicated that they wouldn’t need any help, while twenty-five percent of their offspring indicated they were planning on providing financial assistance in the future. Even though almost all parents in the survey stated that they wouldn’t need any assistance, only a whopping twenty percent indicated that they had enough money saved for a “comfortable” retirement.
So what does all this indicate? On the surface it’s plain to see that parents and their children need to more effectively communicate with each other, especially about their financial situations as adults and what will be expected from one another as parent’s get older. Fidelity went on to provide some conversation starters that parents and adult children (and perhaps particularly mature younger children as well) can use to discuss their financial situations. Here are a few topics that should be discussed:
- “Where is my money now?” – It’s important for all parties to know where their money is, how much is there, and who has access to it.
- “How much money is set aside for retirement?” – How is it set aside? A Roth IRA? A personal savings account? A 401(k)?
- “How much debt do we have?” – Make a list, see what can be paid off most quickly, and get to work.
- “How do you picture retirement?” – It’s important for parents to enjoy their golden years. However, having a financial plan to ensure that they can enjoy themselves accordingly is imperative.
For young parents with children that are still young, think about these ideas and how you can incorporate them into conversations with your children even now. Fidelity Investments suggests that it’s important that kids learn about finances early in life and that you begin a pattern of open conversation regarding these matters earlier rather than later.
Source: US News