How to Talk to Your Adult Children About Financial Planning

Broaching the topic of personal finance with your adult children may be difficult and could require a tactful approach. However, these conversations are important to have. Your children may believe they have a handle on their finances, which may be true, but many parents have important information they need to share with their children, such as budgeting, investing, or information contained in their wills. Having these conversations now is the best way to ensure your adult children are prepared for financial success in the future.

What kind of financial conversations should you be having with your adult children?

The conversations you have with your adult children about finance will depend on several factors, such as the financial resources available to them, their plans for education and employment, the age of your child, and how responsible they have been thus far.

A good time to discuss these financial topics could be when your child is heading to college. This is an excellent time to discuss budgeting, especially if you’ll be helping them financially. While you should avoid micromanaging their resources, discussing, and creating a budget together could be a bonding experience. Most college-aged adults have not had experience managing a budget on their own, since parents typically cover all food, housing, and other essential expenses up to this point.

After college, your child may have questions about other important financial decisions such as  401k contributions or purchasing insurance policies. This may be a good time to discuss how they should budget their paycheck and how they can make smart financial decisions without your financial support. Advise them to set up a will to protect any assets they’ve acquired and protect the family they may be starting to grow. This is an opportunity to help them make sound decisions early in their career that could affect them for the rest of their lives.

Conversations later in life will likely revolve around the financial legacy you would be leaving your adult children. It may feel awkward, but it’s important for your children to have a basic understanding of your net worth, assets they may not be aware of, and anything else they may inherit. Ensure your will is updated, but also discuss your wishes with your children so they are given the opportunity to ask questions and gain clarification. These conversations are important because your adult children need to be aware of your assets in the event that you become unable to manage them yourself. This will enable them to help uncover funds for medical costs if needed and ensure they know what to expect after you pass.

How to introduce the topic of finances?

The longer you wait to talk about finances with your kids, the harder it will be. Having appropriate conversations about money from an early age will make it easier to continue these tough conversations down the road. There are many ways to bring up the topic.

  1. Share an interesting article
    Try sending your child an article about budgeting, investing, or any other topic you’d like to discuss. Ask for their thoughts on the information and then share your thoughts in turn. By starting a low-pressure conversation, you can ease your way into more sensitive topics.

  2. Share some of your regrets
    Admitting that you’ve made financial mistakes reminds your child that everyone is human. It’s also an opportunity to prevent your child from making the same mistakes. Many people regret waiting too long to invest or not contributing enough to your 401k. By sharing how these decisions impacted you later in life, you can help your child understand that financial decisions they make now can have long-term financial impact.

  3. Meet with your advisor

Ask your advisor if they’re comfortable having your adult child join you for your next meeting to review the state of your finances and your investment strategy. Financial planners have these conversations every day and are very skilled at making their clients and family members feel comfortable and informed. This is also a great opportunity to help your child understand the benefits of having a financial planner.

Above all, it’s important to treat your child like the adult they are. Whether they’re heading off to college or already have children of their own, ensuring the conversation remains respectful and honest on both sides will make it more productive. Adult children may believe they don’t need your help anymore, but you have a wealth of financial experience to share with them. These conversations can help you grow closer and ensure you feel good about the legacy you’re leaving your children.

Key Takeaways

Finances are a very personal subject, but there are a lot of benefits to discussing strategies, your financial situation, and future inheritance with your adult children. By starting these conversations early, you can help your children form good habits from a young age. There are many strategies that can make it easier to introduce and manage those conversations. It’s important that your children know where to find important documents and how to access your assets when needed. Working with a financial planner is a great way to make these conversations less stressful and introduce your child to sound financial practices.

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Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.