It’s a sad fact: While the financial landscape has gotten infinitely more complicated, gone are the days of one job for life and a pension when you’re done. Even the children of high net worth families can fall short when it comes to knowing what to do with their finances.
Many of us think finance is taught in school—it’s often not. Even graduates of business programs frequently have no personal financial intelligence. So unless Mom and Dad (or some other concerned person) steps up, children at all wealth levels can enter their adult lives not having a clue.
For many reasons, money is probably the least likely topic on the family ski vacation. But, few conversations are more important. Of course, children need to know the basics to get a good start, but you also want to make sure they are ready to handle the money you may be leaving them.
We’ve identified five actions we believe you should think about to help your children, and you, navigate this complicated, and potentially fraught, landscape.
1. Sometimes, an effective way to deal with a difficult situation is to outsource it. Ask your advisor to consider working with your children. That makes the information transfer seamless, and gets you out of the middle of the information flow. It also creates a positive, open and dispassionate atmosphere around finances.
An advisor who is closer in age to your children would probably be suitable. So, talk to your advisor and see who on his or her team makes sense. Then, consider an annual family meeting that your advisor can run. This gives your children a real “place at the table,” and takes some of the onus off of you.
2. If you are gifting to your children on a regular basis, turn that gift into the key to a lifetime of financial knowledge and ability. You may want to consider earmarking a piece of the gift for professional financial planning. The advisor and the plan can help to both educate your children about money, and communicate healthy values around spending, saving and investing.
It’s in your and your children’s best interest to make them smart, capable and confident in their financial decisions.
3. Be open with your children. Assumptions and surprises often lead to issues around money. “Surprise” money, or money they didn’t know they were getting, (and therefore didn’t plan for) can be a major contributor.
4. Realize they may see the world differently. When you talk, be open to the idea that, for them, a six-month-long service trip to Africa may be more important than saving for a down payment on a house. You may not agree with the idea, but open communication is key to success.
5. The same goes for finding a life partner. Changes in attitudes toward marriage (i.e., the increasing frequency of marriages later in life or not at all), combined with the advancement of women in the workforce makes financial knowledge even more important. Chances are, your children will be starting the career/growth/saving journey on their own—they need to know what they’re doing.
It’s in your and your children’s best interest to get them started right—make them smart, capable and confident in their financial decisions. Once this is taken care of, the issue of money will fade into the background, and family conversations can be about the important stuff, like who’s hosting Thanksgiving dinner.
This information is being provided only as a general source of information and is not intended to be used as a primary basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and CFP (with flame design) in the U.S.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser. Ameriprise Financial Services, Inc., Member FINRA and SIPC. © 2016 Ameriprise Financial, Inc., All rights reserved.
This article was originally published in the June/July 2016 issue of Worth.