Holiday gatherings: A great time to talk family finances
The holidays are a special time to pause from our busy lives and connect with loved ones. For families spread across different locations, these gatherings are often one of the rare moments when everyone can come together. While the focus is typically about celebrating and enjoying time together, it’s can also be an opportune time to have important financial conversations.
The importance of discussing finances with adult children
In my opinion, one of the most crucial conversations parents can have with their children is about finances, especially how they plan to distribute their assets after their passing. Although this conversation can be difficult, it’s essential to ensure that everyone knows what is happening in advance and gets the chance to talk about it.
A recent study by US firm Northwestern Mutual 1, revealed that many Gen X and Gen Y respondents see an inheritance as critical in helping with their own retirement. However, fewer than half of Baby Boomers felt it was important to leave an inheritance at all. I also find it interesting that social media is said to be shaping a generation to have a higher bar in terms of what success looks like by comparing themselves to ‘peers’ or influencers showcasing glamourous lifestyles. Disconnect can lead to misunderstandings, so it’s helpful to address these issues directly while everyone is together.
Choosing the right setting for conversation
Choosing the right time and setting can be key to making the conversation respectful and productive. I suggest finding a place where everyone feels comfortable but also where you can focus without distractions. For some families, it’s a relaxed atmosphere with an outdoor fire and a glass of wine, for others a cup of tea around the kitchen table feels more natural. Or if you think you may need a setting to keep everyone respectful, then reserving a room at a restaurant might be a good idea.
Key topics to address
To make sure your discussion is effective, it’s helpful to have a clear agenda. Start by thinking about what needs to be discussed as a family. Are there financial issues that have been ignored or avoided? You don’t have to cover everything in one meeting—it might be a good idea to only focus on one key topic to begin with.
Some ideas for discussion:
- Aged Care: Anticipate any financial support you may need in your later years regarding care and housing options.
- Assets: The distribution or sharing of significant assets.
- The Bach: How the family vacation home will be handled. As coastal properties have gained value, these assets can become a point of contention, especially when beneficiaries are in different financial situations and geographical locations.
- Trusts: If you have trusts, ensure that everyone understands the trust’s purpose and how it will be managed. Is your family planning to transition responsibilities to younger trustees? Having a shared understanding of the trust’s objectives can help smooth the handover between generations.
- Education: This could be an opportunity to clarify whether your children will need to help fund their own children’s education.
- Trusted Advisers: Ensure that your loved ones have access to the names and numbers of all your legal, tax, insurance, employer and financial contacts. Plan a future time to introduce them to key people.
Approaching the conversation with care and respect
When discussing finances, it’s crucial to approach the conversation with respect and empathy, understanding that different generations have different values and therefore their investment priorities may differ (more on this here). While you may not agree with every financial decision your children make, it’s important to listen rather than try to “parent” them. Instead of offering direct solutions, frame your concerns as questions like: How can I help you? How do you feel about the way things are going? Is there anything about your finances that feels overwhelming? What are your goals for the future?
By listening attentively and showing a genuine willingness to understand, your family can navigate these conversations thoughtfully. While these discussions may be challenging at times, they provide an opportunity to align expectations and ensure that everyone is prepared for the future and the legacy that you want to achieve can endure. Careful planning and open, honest communication will equip your family to manage financial matters together—now and in the years to come.
Our team of advisers here at Alvarium, have helped many families talk about their finances and created financial plans that span generations. We are always happy to help. Please get in touch if you have any questions or would like a helping hand to get started.
Will Roberts
Financial Adviser
Director Private Wealth
1As $90 Trillion "Great Wealth Transfer" approaches, just 1 in 4 Americans expect to leave an inheritance
6 August, 2024 (LINK)
