Politics, religion or money: which topic would you rather broach with family and friends? If you chose politics or religion over money, you’re not alone.
According to wealth psychology expert Kathleen Burns Kingsbury, 44 percent of Americans believe the most difficult topic of conversation is one’s personal financial situation. In fact, many people would rather discuss politics, religion or death with their families over the dreaded ‘money talk.’
Given the current political, religion and technological climate we live in, this statistic is quite telling.
We understand money conversations can be hard for a number of reasons. For starters, you may view your financial situation as a personal matter that shouldn’t be discussed with family or friends, you may be uncomfortable disclosing such personal information or you may be weary to share your current financial situation in the fear that you will be judged, either by the amount of money you have or the amount of debt you have.
However, this Financial Literacy Month, challenge yourself to initiate these sometimes difficult, but always important financial conversations. Understanding your financial situation and improving your financial literacy will help you and your loved ones in planning for the future. While some of this will involve addressing unpleasant topics like long-term care and life insurance, you’ll want to make sure you’re prepared so that when the time comes, the financial implications are not a burden on your family.
You may not have all the answers to life’s milestones and financial situations right now, but financial advisors are a great resource to increase your financial literacy by helping you better understand your financial situation and guide you in tackling the following taboo money topics with your family.
Tough Topics of Money Conversations
- Student loans – Recent graduates may feel ashamed to talk about the debt they accrued in college since they have not had as much opportunity to make a dent in the amount they owe. However, keep in mind that Americans owe over $1.48 trillion in student loan debt, spread out among 44 million borrows. According to Student Loan Hero, that’s more than $620 billion more than the total U.S. credit card debt. So, this is nothing to be ashamed of since over 44 million Americans are in the same boat. By understanding how much you owe and the steps it will take to pay off your debt, you’ll be able to create a plan to pay down your debt that aligns with your current financial situation and will help you tackle saving for the future.
- College – According to College Data, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges and $25,620 for out-of-state residents attending public universities – and the average cost is only going to rise.
If you have a child, or two, who are planning on attending college, it is never too early to discuss how your family plans to cover the cost of tuition. Remember: you aren’t failing as a parent if you can’t afford to pay for your child’s full tuition! Parents don’t have to be the sole contributors to college savings. Grandparents, aunts, uncles, and even the kids themselves can contribute any amount of money to a 529 college savings account. Every dollar saved, is one less borrowed. Save your family the added stress of tackling the tuition bill all at once by having these conversations early.
- Weddings – According to The Knot's 2017 Real Weddings Study, the national average cost of a wedding is $33,391. If you have a daughter and would like to pay for some or all of her wedding, make sure you’re transparent about the amount you have saved specifically for this purpose. It may be uncomfortable, but wedding planning can be stressful and being honest about financial circumstances from the beginning will save you from overspending on the big day.
- Life insurance – Life insurance can be tricky to bring up with your parents since the conversation may seem morbid and uncomfortable. The fact of the matter is, you need to discuss this subject with your family, especially aging parents, because we all need life insurance to protect your family from taking on any of your own personal debt once you die. By knowing your life insurance policy, families can be better prepared should an unexpected death occur.
- Long-term care – Often times, we avoid this topic because we don’t want to think about getting older or address the topic of our older parents leaving home to live in a retirement facility. But, you need to have these conversations about their long-term care wishes early on to avoid children from being burdened by the costs of their parents’ long-term care and to better prepare your family for the future. By taking a proactive approach, you will have more independence, choice and control in the long run.
Best Practices for Having Money Talks
How do you know when the best time is to have financial conversations with your family? There may never be the perfect moment, but there are better timing options like avoiding the subject during high stress periods.
Once you have initiated the conversation, be intentional about your goals of the conversation. Whether you’re talking to your child about paying for college or deciding the best long-term care options for your aging parents, prepare talking points about what you want to cover to keep yourself on track. And try to avoid outside distractions such as crying children, television, tablets or cell phones so the group can tackle the topic at hand.
Understand you’re dealing with other people who may not have had the time to prepare like you have, so use empathy and approach the situation delicately. Parents and older relatives want to feel like they have a say in the matter, especially when it comes to estate planning and their end-of-life decisions. Let the loved one know you want to be aware of their wishes so that everyone can be better prepared. It is also important to accept that you may not agree with their decision, but the most important matter is beginning the discussion.
If things get particularly heated, take a break and come back together later. It is always better to take a minute to gather thoughts and reflect on the conversation, rather than saying something you might regret in the heat of the moment. No one wants to feel attacked while having financial conversations.
At the end of the conversation, summarize what you discussed and confirm with your loved ones that everyone is on the same page. Maybe you write down key takeaways or develop a plan for paying off debt. Either way, everyone should leave the conversation feeling as though the group’s financial knowledge and awareness improved.
Remember, financial literacy involves making prudent money decisions, but we won’t be able to make educated moves when it comes to saving, spending, borrowing, investing or donating money if we don’t have all the necessary information and don’t involve others in the conversation.
Despite Financial Literacy Month coming to an end, these financial conversations should continue throughout the year. Always remember that you don’t have to go about these conversations alone. A CFP® professional can be great a resource to help navigate the waters before you have those tough conversations. They can help you understand your financial situation, prepare for your future finances and understand the available options for you and your family.