Eight tips for talking money with adult kids

Based on an article from our U.S. partners

MARCH 2019

Parents and young adults can benefit from being more frank about finances. Here’s how to do it.

father and daughter discussing something on the computer

Key takeaways

✔ Money can be a difficult topic to discuss but keeping advice brief can help.

✔ Admitting your own financial mistakes and sharing your successes can show that you're trying to help your kids avoid the same missteps.

✔ Setting a good example and being open about finances can help your kids open up to you about their struggles and concerns

 

Are you uncomfortable having “the talk” with your kids? No, not that talk. The money talk. You may not be alone. More than one-third (34%) of millennial young adults admit they find it difficult to start conversations with their parents about saving and investing, according to the Fidelity Investments® Millennial Money Study,1  a study conducted by Fidelity Investments in the U.S.

“Parents and their young adult children may not be communicating as well as they could be about money,” says Ann Dowd, CFP®, vice president at Fidelity. “That’s a big concern for both. The kids are missing out on important lessons learned by their parents, while the parents are risking potential confusion over family wealth and elder-care issues that arise as they age.”

Money talks can be casual conversations or formal family meetings regarding specific situations. And they should address the parents’ financial situation as well as the kids’—from things like budgeting and investing to discussions about the parents’ net worth and estate planning.

The time, place, and subject for these financial talks will vary depending on your family circumstances and temperament, but here are some pointers for talking about money with your adult children.

 

Eight tips for talking money with your millennial kids

Eight tips for talking money with adult kids
Eight tips for talking money with adult kids

 

1. Keep your advice brief.

It can be difficult for newly independent young adults to acknowledge that they can still learn something from their parents. To break through that reluctance, try to keep your advice from sounding like a lecture. Stay brief and to the point, then follow up by suggesting resources for more information.

Try this: You might, for example, point out that credit card debt is expensive and interest charges can pile up quickly. Then send your child a link to an article about managing credit cards wisely.

 

2. Share your experiences.

Let your kids know what went right—and wrong—in your financial decision making. And be specific. You’ll establish credibility with your kids by owning up to your mistakes and showing them that your advice is based on helping them avoid those same mistakes.

Try this: Maybe you realize that you should have started saving earlier for retirement, or that you could have put yourself on solid financial footing sooner if you had been smarter about paying off various types of debt, such as student loans, credit cards or car loans. More than two-thirds of those surveyed agreed that their parents learned from their past financial mistakes, so tell your story and share your experiences.

 

3. Keep your expectations in check.

If you expect your adult child to follow all your advice, you’re going to be disappointed.

Try this: The way to avoid frustration—and allowing it to spill over into other aspects of your relationship—is to accept that your child is going to make mistakes despite your efforts to help him or her avoid them. Showing that you can hear bad news without being judgmental, your child may be more inclined to share information with you before the negatives multiply.

 

4. Set rules when lending money.

In the Fidelity U.S. study, when asked, nearly half of young adults (47%) have received some kind of financial assistance from their parents at some point since leaving home. Topping the list are cell phone bills, car insurance, and groceries. And 25% said that at one point they did have to move back with their parents for financial reasons after they had been on their own.

When it comes to lending money to your children, you may want to have some sort of agreement. It doesn’t have to be a formal contract, but it would probably be better if you set some specific rules, whether your help is in the form of cash or a loan.

Try this: Let your kids know that giving or lending them money doesn’t entitle you to manage their finances. At the same time, you can—and should—establish conditions that are appropriate to the support you’re providing. For example, if you agree to help out with their student loan payment, you might require that they contribute something every pay period to a workplace savings plan (if they have one), or a RRSP or a TFSA. Similarly, if your child is moving to a high-cost-of-living city for a new job, you might offer temporary help with the rent, but be clear about exactly how much help you’ll provide and for how long.

 

5. Discuss investing strategies.

In general, the investing approach of young adults is going to be different from that of their middle-aged parents. Still, it’s helpful for your kids to hear how you decide where to invest your money. It will help them understand the need to be strategic in their decisions and make choices that are appropriate for their situation.

Try this: Talk with your kids about basic concepts such as diversification, and show them how you have incorporated these principles into your investment portfolio. Fidelity has some articles on fidelity.ca, in the “Investing for the long term” section.

Suggested readings include “The risks of “safe” investments”, which talks about reasons to invest in stocks (also knows as equities). It explains that if you're saving for a far-off goal, not investing in stocks may be risky. Another article they may want to read is  “Diversification = less risk”. This article talks about why it’s important to put your money into different types of investments to help you reach your investment goals.

 

6. Set a good example—and let it show.

One of the findings in the Fidelity U.S. survey is that 65% of young adults felt that their parents provided a good example of how to have a successful financial future. Keep it up.

Try this: Who doesn’t need some reinforcement on the principles of sound financial planning? Try setting an example. So, when offering advice to your adult child, you might try adding, “This is something that could help me, too, and I’m going to start saving more, borrowing less, etc.”

 

7. Don’t avoid the inheritance topic.

One reason cited by parents for holding back on discussing their net worth is that they don’t want to inflate their kids’ expectations of an inheritance. It’s a legitimate concern, especially in families with significant wealth. Parents are fearful of creating a disincentive for their children to put forth their best efforts in pursuing a career and achieving financial independence.

Try this: Openness and honesty are the best policy. Tell your children your concern. Explain that it isn’t because you doubt their character but because you have been around long enough to see that wealth can be a burden as well as a benefit. You want to be sure that your family’s money doesn’t hold them back from building their own legacy. Then go ahead and talk.

 

8. Discuss your finances with your kids at least once a year.

Setting aside an hour on a holiday when everyone is together can be the perfect way to bring everybody up to speed on family finances. You can provide updates on your retirement plans, your charitable contributions, or any changes to your estate plan. The kids can offer their thoughts and share information about their own financial concerns and progress. Be careful not to pry. Allow your kids to share as much as they’re comfortable disclosing, and remember that the more open you are, the more they will be, too.

Try this: It’s important to tell your children about your retirement plans to ease their concerns about your future. Our survey found that the biggest areas of disconnect between parents and their millennial kids was about the importance of having frank conversations about parents’ ability to cover living expenses in retirement, their health, and issues surrounding long-term care and elder care. Interestingly, kids thought those topics were much more important than their parents did.

 

Why it matters

There are many reasons why discussing financial matters with your adult children is important. Perhaps the most compelling is that it will help build trust and increase their comfort level in seeking financial advice. In the Fidelity U.S. survey, only 22% of young adults (age 25 to 35) said their parents were their most trusted source of financial advice, and one-third said they don’t trust anyone on money matters.

Financial conversations aren’t always easy, but they’re a great long-term investment.



1. The Fidelity Investments® Millennial Money Study is a follow-up to the 2014 Millennial Money Study. The study was conducted in the U.S. from July 27 to August 2, 2016, by GfK Public Affairs and Corporate Communication, using GfK’s KnowledgePanel®. In total, 615 adults, age 25 to 70, were interviewed: 305 were millennials (born after 1980, although for the purposes of this study, millennials are defined as those who are age 25 to 35, to ensure they were old enough to work full time), 155 were Gen Xers (born 1965–1979), and 155 were boomers (born 1946–1964). To qualify, respondents had to have either a living parent or an adult child over the age of 18. Data was weighted to bring each group in line with the population they represent.

Fidelity and GfK are not affiliated.

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