Speaking with your parents about money can be uncomfortable, especially when you need to provide them with financial advice. Whether you need to discuss their will, their debt or even their retirement plan, the key is to pick the right time and smartest approach. So, let’s look at some of the best practices for speaking with family members about how they manage their finances.
Get Your Own Finances Together
Before you sit down and spell out smarter approaches to finances with your parents, make sure your own finances are in shape. Be the example. Nobody will take you seriously otherwise. If you need to get your own financial situation in check, take a look at these helpful hints for getting you there.
Common Financial Conversations to Have with Parents
The only thing more awkward than talking about money, is talking about money with your parents. They brought you into this world, changed your diapers and raised you to adulthood. And now you’re going to give them advice on one of life’s trickiest subjects. Before you even think about sitting down with the parents to discuss their money, make sure you’re choosing the right battles. Instead of picking at their mistakes, guide them with information. Consider these three common conversations you may have to have with your parents.
Making a Will
It’s never too soon to make a will. As morbid as it may sound, we don’t have much control over when we die. It could be in twenty years or twenty minutes. Due to this uncertainty, you shouldn’t hesitate to speak to your parents about creating a will. Better yet, start the conversation by getting a will for yourself.
When talking to your parents about making a will, do so gently. After all, this whole conversation forces them to take a look at their mortality. In order to minimize any awkward moments, make sure the conversation is all about their intentions. Make it clear that you don’t care where the money goes, but rather, you want them to have all their affairs in order, so their money isn’t divvied up by the court system.
In many cases, investment accounts such as IRAs or 401(k)s will be your parents’ largest source of income throughout retirement. Like all investments, the power of these accounts is in the time. If they keep contributing to these accounts for many years, they will continue to accrue increasing amounts of interest. Even with the ups and downs of the economy in recent years, the overall trajectory of the stock market has always been up. In other words, the earlier your parents start saving, the more money they’ll have at the time of their retirements. Because of this, you should consider having this talk sooner than later. If they start investing in their mid-50s and 60s, they may not have time to build the necessary funds.
If you’re worried about your parents’ retirement plans, it may be a good idea to enlist your siblings or other family members to join the conversation. They can help you emphasize the importance of this situation and keep your parents on track. That said, you should focus on asking them questions, not telling them the problems you see. Simply asking what their plans are for retirement is a good place to start. If they’re uncertain, you might point them to a retirement calculator, which shows how much money they’ll need during their golden years. From there, guide them through making a plan that helps them meet those goals.
In some cases, it makes the most sense for your parents to work directly with a financial planning professional. Do the leg work for them and find some accessible and affordable options.
Talking with your parents about their debt may be the most difficult of these conversations. In this situation, it’s usually best to start by being a resource or by leading through example. For instance, don’t be afraid to share the positive financial choices that you’re making in your life. You don’t need to rub your success in their face, but gently make them aware of what’s working for you. You’re their child, and they want to hear about your successes. This, in turn, gives them the opportunity to follow your examples without feeling disrespected.
You might also consider sharing valuable information that you hear about managing finances. For instance, simple solutions, such as refinancing their mortgage, online budgeting or applying for a reverse mortgage might be just the thing they need to improve their financial situation.
Sometimes, the best way to get through to your parents is to be direct. Asking them to sit down and discuss money may feel uncomfortable for all of you, but think of the benefits. This single conversation could save your family years of stress and financial uncertainty.
Take some time to get prepared for this conversation. Go as far as to think about the tone of voice you’ll use when speaking with them. In an interview with DailyFinance.com, Patricia Seaman, senior director of the National Endowment of Financial Education in Denver, mentioned the importance of the way you speak in this situation. “Stay sensitive to your parents and keep boundaries in mind,” Seaman says. “You don’t want to roll over them, so you should think of them as your equal.”
Once the cards are on the table, be ready with a plan to help them get organized. Whether they want to set up a budgeting account on mint.com or they prefer the old-fashioned pen and paper budget, guide them through the steps needed to make that happen. The key is not to point out their failures but to offer suggestions that can help their overall situation. Simply setting them up with a budget would be a great place to start.
As you begin to effectively communicate with your parents, remember to approach each situation with love and humility. There’s a significant difference between helping someone and fixing them. Before you begin talking, think about where that line is. And you may find that, even if you take these precautions, your parents won’t receive this conversation well. This is an unfortunate reality, but spending time preparing for the talk is a good way to keep any unnecessary confrontation at a minimal level. Come ready with a checklist (perhaps some of the items above) of what you want to talk about and have resources in mind that can help your parents reach their goals. This may be a difficult conversation, but these are the people you hold dearest. Sometimes, that means sitting down and talking to them about money.
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