Financial Planning: How to Talk To the Family about It
Financial planning within a family commonly affects three generations: the marriage partners, their children and their parents. Family relationships develop over time and are complex at best. Most often the responsibility for discussing family finances falls on the marriage partners, i.e. the middle generation. Family conversations about money and financial planning can be very difficult. Knowing how to talk about money and how to manage your financial conversations can make life much easier.
Families should be able to enjoy life without continuously worrying about finances. Consulting a StoneHouse Capital Partner can shift the burden away from those who feel the need to discuss financial matters, while not knowing how to do it.
Financial Discussions amongst Marriage Partners
Financial planning discussions amongst marriage partners should be ongoing, from before they get married until the relationship ends. This will strongly affect how they spend their married life. The input of a Certified Financial Planner (CFP) can guide marriage partners throughout the course of their lives. The following areas should be covered:
o Income generation
o Expenses
o Lifestyle considerations
o Healthcare planning
o Retirement planning
o Insurance for disability and death
o Savings
o Investment planning
o Estate Planning
The StoneHouse Capital website has numerous articles in its publications section. These can serve as useful topics of discussion.
Some general parenthood issues can have important financial implications:
o Children: yes/no, now/later?
o Fulltime vs. part-time parenthood?
o Financial decision making: how is this responsibility shared and how is it done?
Teaching your Children about Finances
If marriage partners have good financial planning and execute the plan consistently, the chances are very good that their children will follow suit. However, it remains most important to talk to children about money, especially when it comes to four issues:
o Basic money management
o Saving
o The advantages of investment
o The dangers of debt
Financial Discussions with Parents and In-Laws
Caring children do not want to see their parents suffer financially. Partners can encourage their parents and in-laws to prepare for their mature years by talking about:
o Healthcare
o Retirement planning
o Estate planning
o Setting up a trust
o Insurance
o Income generation
Partners need to have the assurance that their parents’ financial documentation is in order. This includes:
o Will: How are assets to be distributed on event of death? Most importantly, is it up to date?
o Power of attorney: Have parents given power of attorney to anyone?
o Living will: How are financial matters to be conducted in the event of medical incapacity?
How to Talk about Finances
In spite of the difficulty surrounding discussions about money, there are some things one can do to have constructive financial discussions:
o Hold discussions in an emotionally neutral atmosphere: It helps to state the purpose of a discussion, e.g. €Let’s talk about how we’ll finance Johnny’s education.€ Try to remain objective and even-tempered throughout the discussion.
o Ask for information: Factual information is the basis of all constructive discussion, especially when it comes to finances.
o Give information: If you hold information that can have an impact on the outcome, you should share it during the family discussion.
o Ask for suggestions: People are more likely to contribute valuable ideas if they know their suggestions will be considered.
o Make suggestions: Put your ideas on the table.
o Check your understanding: Make sure you have the same idea as those with whom you are talking. You need to do two things: Firstly, reformulate what others are saying by putting their ideas in your own words. Secondly, ask them if your understanding is correct.
o €Moving On€: Don’t get stuck on one point. If there is a deadlock, set the point aside for later discussion. New information or suggestions about other points may resolve the deadlock.
o Summarise the points: At any given time you can recap the key points of the discussion.
o Finalise: If any decision has been made, you can finalise the discussion towards the end by saying who will do what and how it will be done.
Ideally, financial discussions make use of these techniques in a balanced way.
The value of impartial participation in a family’s financial discussions by a CFP cannot be understated. By the wealth of information on which they can draw, and the options at their disposal, the Partners at StoneHouse Capitalcan ensure that family financial discussions are resolved in the most constructive way.