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Tough Talks: Two Impactful Yet Difficult Money Conversations for Parents of Young Adults

Tough Talks: Two Impactful Yet Difficult Money Conversations for Parents of Young Adults
Charles Crowley, CFP®, AIF®
December 8, 2020

There are very few concepts that can strain relational dynamics and provoke anxiety quite like discussing money with family, especially your young adult children. It generally isn’t something many parents are comfortable doing, and that is under “normal” circumstances. The stress is typically compounded when these conversations occur under duress or will inevitably induce major conflict within the family unit. Sometimes the circumstances are unforeseeable and the stress unavoidable. But many times, the contention can be avoided by simply being intentional and having these tough conversations now and on your terms.

I’ve personally and professionally seen examples of two situations play out this year that I wanted to share with you as some intentionality and proactiveness with conversations could have made (or DID make) a difficult situation a bit more digestible for everyone involved.

Conversation 1: Pulling Back the Curtain
Far too often, young adult children are completely in the dark regarding the parents’ financial situation until circumstances mandate their involvement. Whatever the catalyst actually is, what is most important to highlight is that starting a conversation sooner rather later may very well prove to be the gradual education the adult child(ren) need to not only handle the parental situation prudently later on, but to make better financial decisions within their own situation now as well.

We often encourage our clients to involve their maturing children at the earliest stage comfort and circumstances will allow, even if that involvement is only to begin a process of comprehension. Certainly, every family is different, and circumstances will assuredly dictate the timing and structure of this sort of conversation. But, as you consider what a productive conversation about the financials with your maturing child(ren) looks like, consider the following four items:

1. You don’t have to reveal the entire balance sheet on day 1 (or ever if you don’t want to)! You don’t even have to rip the band-aid off conversationally- get your advisor involved! We typically start the process in our firm by recommending that the parents introduce the child to our team and frame the conversation as

a) these are the individuals that helped us to accomplish what we’ve accomplished with our money,
b) we want to ensure you start this process for yourself so that you can too be successful when faced with some of the same decisions in the future, and
c) you are going to be integral part of our situation one day. So, we want you to understand where our heads were at when making these decisions.

2. Think about what you would you like them to learn through the process of revealing some/all of your financial plan. As parents, we shouldn’t be afraid to share our success and failures with our kids so that they can learn from what we’ve already experienced. I recently listened to a pastor I enjoy, Steven Furtick, speaking about past mistakes. He said, “… don’t judge yesterday’s decisions with today’s wisdom.” That said, how ideal is it to be able to use our gained wisdom to help our children NOT make the same mistakes we made, especially with money! Take the time to explain what you feel you’ve done well and where you’ve missed the mark financially- trust me, it makes a difference.

3. There are times where we encounter one spouse handling ALL financial decisions in the relationship, someone for this purpose we will call the “driver.” This is perfectly fine if that is what works for your family unit. However, these scenarios specifically are ones where you want to be sure to discuss how an adult child (ren) might be inserted into the equation to help the more hands-off spouse should something happen effectively eliminating the “driver’s” ability to continue fulfilling the same functions (disability, death, etc.). Evaluating which adult child is best suited to step in and handle specific duties is a key decision that spouses should discuss and decide together, and that is true even if you share the duties with your spouse vs. a one-does-all approach!

4. Leave a “key” for your children- you will see varying labels for this sort of thing, but what it boils down to is not leaving your adult children left guessing as your agents and heirs. Leave a guide for at least the following and ensure they know where it is:

  • Your financial assets- note where is your money held and who to talk to should something happen.
    o Your legal documents (wills, powers of attorney, healthcare directives, trust documents, etc.)- Where are the originals? Who has a copy and who can help execute the provisions if/when necessary?
  • Passwords and other access credentials- Information security is paramount in today’s world, but I can’t tell you how many times I’ve spoken to individuals handling parents’ affairs where weeks were spent trying to figure out access to various things because the credentials were never notated anywhere.

Conversation 2: Boundaries with Financial Assistance
In our “discovery” process with a new client, there is a reason why one of the first possibilities we cover is financial dependency. Specifically, we want to have very clear dialogue about whether there is or might be an adult child or parental figure reliant on the client for financial support. We must understand as advisors how highly this desire or necessity ranks within the hierarchy of goals as it can be something that completely derails a financial plan if not planned for properly. What I often find in these conversations is that a sense of responsibility, obligation or guilt clouds rationality and blinds people of the feasibility of the support itself. I’ll focus on the support of an adult child for today.

As a parent myself, I can now understand the heart-string tug one experiences as you consider how to best assist a struggling child. I have a colleague that often says, “you’re only as happy as your most unhappy child.” And that is very true. But what we all must understand as parents is that the best gift we can give our children is taking care our own situation first so that the burden of our care and support is not on them later in life. The second-best gift we can provide them is the ability to be self-reliant and these two things tend to work in tandem. Since it is something easier said than done, below are four pieces of guidance we often give to navigating these extraordinarily tough conversations:

1. Before anything monetary is provided, understand how the commitment will impact YOUR situation now and long-term by speaking in depth with your advisor. Understand what you may be sacrificing in order to engage/continue assistance.

2. Set proper limitations and timelines for your assistance. Set expectations with your child as to what can be done and for how long to not detrimentally feed the dependence further. Accept that saying “no” is many times a form of helping- yourself and the child.

3. Don’t be afraid to tie in conditions to your financial support- the adult child must have incentive to take ownership of their situation and be held accountable in doing so.

4. Consider alternatives in how your financial support is shown. In lieu of purely giving cash, potentially provide access to resources dealing with career advice, cashflow management, debt prioritization, etc. Because cash can be used as a crutch, think about what might be energizing and positive to the situation and is less corrosive to your success than say becoming a perpetual ATM.

Now, while I do NOT recommend making this your holiday table topic, I do hope the concepts shared today will be helpful as you consider how to be intentional with some of these same challenging conversations in the very near future. Certainly, draw your Atlanta Financial advisement team into the discussion as having a partner is these chats is often key in minimizing the relational strife. We also have several resources that we can provide to assist in gathering your thoughts and formulating a plan for the discussions.

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