What’s a conversation you may not be having with your parents? It may not be what came to your mind first! If you’re in your mid-20s or early 30s, there’s a good chance it’s about money. Yup, a Fidelity study found that nearly one-third of young adults say they find it difficult to start conversations with their parents about saving and investing.1
It is never too late to start. Here are some ways to talk with your parents about financial matters—both yours and theirs.
|1.||Ask for advice.|
“I was wondering whether I could get your advice about something.” That simple question can strengthen the relationship between you and your mother or father. What that probably says to them is, “I need help with something, I trust you enough to tell you what it is, and I respect you enough to value your opinion.” That approach can work for all aspects of the child-parent relationship, but especially when talking about money.
Give this a try: You might start with something like, “Do you think it’s worth paying an annual fee on a credit card that offers rewards?” Or, “Do I need life insurance?” Then, as you and your parents feel more comfortable with the discussions, you can get into more complex questions, such as, “How can I budget my money better so I have something left over to save?” Or, “Do you think I should keep renting or look into buying a house?”
Asking for advice doesn’t require that you follow it—just that you follow up. If you want to keep the relationship with your parents on solid ground, let them know what you decided, and be specific about your decision-making process.
Give this a try: Using the credit card scenario as an example, you might say: “I chose the credit card with the fee and the airline miles. I know you suggested the one with no fee, but the airline miles will make it more affordable for me to fly home. Plus, the interest rates were about the same, and I avoid finance charges anyway by paying off my balance every month.”
|3.||Keep them updated.|
Talk with your parents about financial matters even when you’re not looking for guidance. Make it clear, if necessary, that by sharing information, you’re not inviting them to micromanage your affairs. You’re simply showing that you understand how to handle your finances wisely and, in doing so, putting their minds at ease. If you’re struggling, on the other hand, you’ll be in a much better position to ask for help—and you’ll find a much more receptive audience—if you’ve been open about your situation and what you’ve been doing to address it.
Give this a try: Share things such as your 401(k) plan at work and how much you’re contributing, what type of health care coverage you have and how much it costs, how you’re coming along in paying off your student loans, and how you invest your savings.
|4.||Be clear about expectations.|
If you get financial help from your parents—and our study found nearly half of young adults do—make sure you both are clear about the expectations that come with it. Failure to set limits on the amount, duration, or payback terms (if it’s a loan) can lead to frustration and resentment all around.
Give this a try: If your parents agree to help pay your rent while you’re still getting on your feet financially, make sure you know how long they intend to help and whether they expect to have a say in how you budget your money. Feel free to negotiate by saying, “I appreciate the offer to help, but I think it’s important for me to manage my own budget. Could we treat your help as a loan instead?”
|5.||Tell them your concerns about them.|
Many parents are as reluctant as their kids to share financial information. Sometimes they’re concerned that disclosing their net worth will cause their kids to count on an inheritance instead of working hard in their own career. Other times it simply doesn’t occur to them that their kids have an interest—and a stake—in their financial well-being. In either case, you should assure your parents that your concern is about them, not their money. And be honest about the fact that knowing where they stand financially will help you be prepared to assist them later in life should they need it.
Give this a try: Tell your parents that you know it’s likely to be a long time before they might need your help making decisions or managing their finances, but you’d like to get the conversation started. Ask them:
- “Do you have a will, and have you done any estate planning?” Don’t ask them to disclose what’s in the will. Let them offer that information if they want to.
- “Do you have long term care insurance or any money set aside to pay for long-term care if you need it?”
- “Have you thought about when you’re going to retire, and do you have an income plan for when you do?” If they’re already retired, still ask them about their income plan and whether they’re comfortable that their money will last.
- “Do you have a living will?” This isn’t a subject anybody likes to discuss, but tell your parents that if either of them were to suddenly become seriously ill, you’d feel much better if you knew you were doing what they’d want.
- “Where do you keep your financial records and your usernames and passwords?” Explain to them that the reason you’d like to know is that it would be a big help in case of an emergency.
|6.||Suggest an annual family check-in.|
Every family is different, but sometimes important topics are easier to discuss if the family agrees on a specific time to address them. Often the best time for a family meeting is a holiday when the entire family gathers. If you have brothers or sisters, it’s important for them to be involved as well.
Give this a try: Even if you talk about money issues throughout the year—and you should—an annual family meeting is a good time to look back and evaluate how any changes during the year will affect the family’s financial situation. For example, if you had a baby during the year, you might tell your parents you opened a 529 college savings plan, which might prompt them to do the same. Or your parents might use the opportunity to tell you about any estate planning moves they made during the year—or are considering for next year.
Go for it
How you choose to talk with your parents about financial matters and the specific issues you address will depend on your and your parents’ circumstances. But this much is certain: You and your parents will be better off for having the discussions. Honesty and openness increase peace of mind on both sides of the conversation, and that will carry over into all aspects of your relationship with your parents.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917