Hi Everyone! Welcome back to Melissa Making Cents!
I made the decision this year to do my best to be present and in the moment with my family and friends while we are together during this holiday season. Which meant that I may have to postpone writing. Let me tell you…. It was worth it. Don’t get me wrong, I really really love writing these blogs! But some of the conversations and quality time I’ve had over the last week has been memorable.
As a young child I remember the wonder and the magic of the holidays. Thanksgiving and Christmas hold so many wonderful memories for me. It truly was the most wonderful time of the year, because it meant I was going to see my family! My aunts and cousins would come in from California, Hawaii, and Tennessee! Spending all the extra time with my grandmother, and listening and participating in various holiday traditions has given me a lifetime of smiles.
I know that not everyone has the same memories and feelings I do about the holidays. For some, it's a really hard season. As we get older the years seem to get harder and harder as we lose those we love and hold dearest to our hearts. If you are anything like I am, the holiday season makes you long for the days when you thought “Adulting” would be so much easier.
Today, I would like to talk about family and money. Which I know is very much taboo. I was personally taught to never discuss money, religion or politics. And…to me there are definitely times and places that these subjects shouldn’t come up. BUT… Money NEEDS to be talked about. I say this is a NEED, because as I discussed in my blog on balancing Savings and paying of debt, there is a strong connection between money and mental health. ESPECIALLY during the holiday season.
Money is full of negative emotions
One of the biggest reasons we don’t talk about money is that is has a reputation for bringing negativity into our conversations. No doubt you have heard the biblical quote, “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” I’m not providing the quote to flex my religious skills, because I can honestly confess that it’s furthest from my strengths and closest to the bottom of my weaknesses. Instead, I want to show you where some of the negativity comes from.
In my house, and in many houses I knew growing up… You just didn’t talk about money. It’s a necessary evil in our modern world. For some families the negativity comes from not having enough to provide for the entire family’s needs and wants. For other families the negativity comes from not wanting anyone to know what you have. In both cases ... not having family discussions about money will do more harm than good.
Not talking about money leads to poor money management skills.
As children we learn our money management skills from watching our parents and our role models. Frankly, it’s hard to learn about something when no one wants to talk about it! Studies show that kids that come from families that do not openly talk about money are more likely to make poor financial decisions and get into serious credit card debt.
Let me be the poster child for that last sentence. Growing up, I watched my mother work 2 jobs to give us every opportunity we could imagine and more. We knew she worked the night shifts as a nurse, and frankly we took her hard work and desire to provide for granted. What I learned through example was you can work hard and still buy anything you want, no matter the cost. Where did it get me? Seriously in credit card debt. Mom never said no, and she never showed us that she was also saving for retirement while juggling the needs and wants. Also… let’s just get this out there… Having two teenage girls in her house.. there really was no “Wants”, everything always seemed to be a “need”. Looking back, I realize how many valuable lessons I missed by not having money conversation, and how much more quality time I could have spent with her if she had not had to work so hard.
My life significantly changed 15 years ago when I started my career as a financial planner. I knew I was going to have to clean my act up, and practice what I preach. How else was I going to honestly look clients in the eyes and tell them to put their trust in my money management skills. I just shake my head in shame for not learning my lesson sooner, because it would have saved SOOOOOO MUCH MONEY!
Having money conversations isn’t about spilling your guts to the world.
I’m not telling you to find the guy or gal behind you at the grocery store and tell them exactly how much you have in your bank account, and the balance of your credit cards. But what I am telling you is that you need to be sitting down for monthly family meetings to talk about saving and how much it costs to live. This will make other conversations, such as college funding, easier down the road if we can get the entire family on the same page. Do you need to tell you kids exactly how much you have? Again… that’s a no. But they should know the family budget, and how you are working together as a family to save for things. They should also see you saving for your future, aka retirement.
Starting to save early for retirement means that you have a little more flexibility on your options to get to your goal. Let me rephrase… When you start saving early you don’t have to make aggressive investment decisions later in life to get to a “comfortable” spot. You can afford to treat yourself to things or take vacations, as long as you are balancing saving for your future with living in the “now”.
Having regular money talks in the family will help your children be an active part of your family. Although they may not be contributing financially to put a roof over their heads or food on the table… They also may be willing to do a few more chores, or not give you as hard a time when we simply can’t afford the latest greatest toy. It may also help them to realize that their “wants” may not be as important as the family’s”needs”. After all.. how long will they really play with that Hatchimal?
You should also be talking to your parents about their money situation as they get older.
As our parents age, we need to get involved in their finances. Again.. I’m not saying you need to be smack dab in the middle and know every detail. But you do need to have an idea of what their financial situation is. Make sure your parent’s legal work is up to date. Make sure someone has a power of attorney and can step in to handle things when life throws one of those ugly curveballs I talked about in my blog about your money mindset.
Let’s face it..at some point nature wins. My heart goes out to all of you that have lost your parents and other loved ones. You have no doubt been through the pain of losing a loved one followed by the pain of getting an estate wrapped up. Keeping up to date on legal work, and having all of your finances organized can help alleviate this stress. I would also tell you that you need to meet your parent’s financial advisors. It will make the transition easier for you to begin taking care of their finances in the long run.
Keeping in the loop in your parent’s financial situations will also help you protect them in the event a mental issue comes up. My Uncle affectionately refers to this as his “CRS” or “Can’t remember shit” disease. Doctors would call it Alzheimers or Dementia. In any event, being in the loop can help prevent them from being taken advantage of by a scammer or fraudulent transactions. You may be surprised how many times I’ve heard family members step in to say the messages you get from the “IRS” are not real.
Older people often have a hard time asking for help
Be it a generational characteristic or just plain pride… often times older people have a very hard time asking for help. In more conversations that I’ve cared to have had, I have realized that looks are quite deceiving. While a parent or senior friend, may seem to have everything together, they could also be struggling financially and doing everything in their power to not show their reality. They are likely to put themselves into a severe depression covering up their financial struggle.
A few years ago, I was working with a Pro-Bono client on creating a monthly budget. He was a senior that had lost his wife, and between medications and “needs”, his social security check was stretched pretty thin. This man was severely depressed, and absolutely didn’t want his children or any of the church congregation to know about his struggles. He literally broke my heart when he told me that he had been eating canned cat food from the dollar store in order to afford his electric bill for the summer. If I was a betting woman, I would bet you that his children would step in to help in a heartbeat. Pride wouldn’t let him talk to his children about his true needs.
Money arguments a leading cause in divorces.
If you have not had a money conversation before you are married, then schedule one ASAP! Given that money can be a source of so much strife between couples, it’s obvious that partners should make an effort to be more open about financial concerns and plans. But there’s another argument in favor of openness: Joint financial decisions can make us more risk-averse and less prone to errors.
I was listening to a presentation on college debt, when the speaker said that his daughter was in the process of dating after graduating from college. He laughed and said “she declines lots of second dates due to the amount of debt a potential suitor has accumulated in college.” Which gives me two reactions… Heck Yeah Girlfriend!! And Grasp...OMG! Kudos for putting those cards directly on the table right away. With Student loan debt currently standing at over $1.6 trillion, having these money conversations right out of the starting gates seems to be a path lots of millennials are taking. I’m not sure I would have declined dates for having debt, but then again times and conversations are changing!
How to start having a money conversation.
While this theoretically is a no brainer… In practicality.. it takes a little work. Now we have come full circle to the whole money being the root of all evil. If you are not already used to having these conversations, you need to start slow or the entire process can get emotional and overwhelming. Have a good idea of the level of comfort each person in the conversation has with their money. If this is a first time conversation, you may simply discuss how money makes you feel. You may be surprised at some of the answers that come up.
Money conversations should NEVER be lectures, and they should ALWAYS be judgment free zones. It’s important to remember that not everyone has the same level of money intelligence, and sometimes money scares us because of the past mistakes we have made. Let me remind you of the older gentleman I worked with. He was so ashamed of being judged for his situation, he had become depressed. Judging him for making certain financial decisions would not have helped in the least bit.
If you start a money conversation without taking into account a person’s confidence or feelings about money, you are very likely to shut them down. Not everyone understands what their net worth is, nor do they understand basic things like taxes and saving. If there seems to be a little tension, start the conversation by sharing a personal story about you and your finances. It’s ok to tell someone that you have debt, and you are working to pay it off by doing XYZ. You can also admit that having the debt feels awful and stressful, because it means you can’t spend money on things you want to do.
How to talk to your children about money.
This also sounds like a no brainer. But you have to remember that our children are not adults. Their capacity to grasp the concept of money is very immature. For my daughter, I started off with a small hand sized piggy bank, and coins I picked up while traveling that are too big to swallow. For her it’s fun to hear the clinking and shaking the poor little pig until the coins come back out. For me, it’s a good first start. Because at two years old, I don’t think she will understand the power of compound interest and a high quality dividend paying stock. (Some adults don’t fully understand that!)
But...even at the age of two years old, we have already started adapting some of our future money habits. I found a great article from Parent magazine called Money Milestones for Kids: An Age-by-Age Guide. It gives great topics and fun exercises to talk to your child about money from age three through high school.
Age 3: Practice Patience
Age 4: Go Over Counting
Age 5: Associate “No” with Spending
Age 6: Start Giving an Allowance
Age 7: “What do you want to be when you grow up?’
Age 8: Show what household things cost
Age 9: Open a Savings Account
Age 10: Teach the Truth about Credit Cards
Age 11: Talk about Name brands and Advertising
Age 12: Demonstrate Wise Purchases
Age 13: Interact with the Stock Market
Age 14: Make your kid work
Age 15: Open a Checking Account
Age 16: Find your money balance
Age 17: Explain Credit Reports
Age 18: Talk about Student Loans
How to talk to your parents about money.
I’m not going to lie to you, this will likely be very difficult. And any parent reading this will likely agree with me. Money and driving are two things we don’t care to give up, because it gives us a huge sense of independence. If your family isn’t used to talking about money, it can also lead to a feeling of “too much too soon”. It can be overwhelming to have someone dig into your financial life, and it can make people feel like they are being judged. Or.. worse.. it can make someone feel like they are about to be taken advantage of and they will lose all their hard earned money. Intentions must be sincere and clear.
Here are a few questions to help get the conversation started with a parent:
- How are YOU doing?
- How comfortable are you with your finances?
- How do you feel about money?
- Is there something you would like to do but can’t afford?
- When was the last time your legal work was updated? Where is it kept?
- Would it be possible to meet your financial advisor, so I can help you when the time comes?
- What is the most important financial lesson you would like to pass along?
As I’ve said before, slow and steady is a great pace for money conversations. It’s also much better to start the conversations early in life to prevent mishaps in the future. The last thing you want is to get a call from a bank because checks keep bouncing, only to find out your dad has been sending money to “someone he met online”. Think it sounds far fetched? Think again…
Take the opportunity this season to really get in touch with your family.
There really is no time like the present to start getting your finances organized. With the new decade approaching, you can use this time to start making this decade better than the last! Take advantage of your time together this holiday season and have some heart to heart talk with your family and friends about money. Be brutally honest with yourself and them about your financial situation. If you or a family member is struggling, there is help available.
As a CERTIFIED FINANCIAL PLANNER™, I work together with families to help educate them on any financial topic that may arise. By empowering each family member we are able to help them grow together as a family, and set financial goals for their future. Give me a call, and let me help your family work towards a more confident financial future.
Until next time... this is Melissa Making Cents!
Melissa Anne Cox
CERTIFIED FINANCIAL PLANNER™
College Funding and Student Loan Advisor