Worried about the “birds and the bees” talk with your pre-teen daughter? You’re not alone. However, if you’re concerned about your aging parents or your adult children’s finances, you’re in even greater company. Talking about money with family can be extremely stressful, but it is possible to do it and do it well, if you remember some simple rules: Do it early, build the relationship and have empathy.
“Money is the most taboo, fearful subject that we can encounter as people,” says Dr. Nancy Molitor, Clinical Psychologist and Public Education Coordinator for the American Psychological Association
Part of the reason, she says, is because money and the issue of how to manage money means different things to different people, and growing up, most of us didn’t learn how to have these discussions.
Money can mean not just financial security, but also emotional security, or lack of it. Money can mean love, and for some, it is something to be afraid of. Retirement stirs up even more psychology because you are talking about people’s fears of their own mortality, she says.
Red Flags
“The best possible time to have this conversation is before something gets to be a crisis,” Molitor says. People are less defensive and there is less emotion attached when you start early. Dr. Kathleen Gurney, founder and CEO of the Financial Psychology Corporation, and author of "Your Money Personality: What It Is and How You Can Profit From", agrees.
Children of aging adults often wait until their parents’ are not able care for themselves adequately. Some warning signs, says Gurney, include parents cutting back on trips, clothing, food; depression, anxiety, or sleeplessness; and house organization changes coupled with as inability to find important papers and keep finances in order.
When looking for tell-tale signs of problems with your adult children, Paul Reed, EVP and manager of AXA Advisor’s Boston Branch, suggests asking yourself, how does their marriage appear, can you sense frustrations; are you seeing less of your children or grandchildren; and is the home that your child bought a couple of years ago still not furnished.
Assuming that you start at the right time, Molitor suggests having a series of short discussions.
“Very few things in life are solved with one big talk,” she says. “The first conversation should be a basic probe. It might be when you’re on vacation with them, or out for an evening, and you happen to say, “Boy, have you been paying attention to stock market? Just wondering, how are you guys doing with that?”
Gurney adds that you should always talk at times when it is relaxing.
The next time, Molitor continues, you might go out of your way to take mom or dad out for coffee for some other reason and then bring it up again.
“You know, remember that talk we had a couple of weeks ago, I got to thinking, gosh, my husband and I have met recently with a couple of professional financial people. I don’t know that you ever talked to me about that, Dad.”
Many people have a lot of anxiety when they start these discussions and you end up putting your anxiety on the other person. For the example, with the adult child who wants to have a discussion with her parents, her emotions may be very loaded, her tone may be a little too intense or too shrill, and it is going to make her parents more uncomfortable.
So, before you start any difficult discussion it is always important to monitor you own anxiety level.
Gurney also stresses the importance of having empathy. Put yourself in the mind of the other person, if the roles were reversed, how would you feel? Questions are always a good way to start—general questions about life. Most important: listen, listen, listen.
Moiltor says she counsels people to work on the relationship first. If there are some older issues that need to get dealt with, that needs to happen. Once you have repaired some of bad blood, you will be in a much better place to have those tough discussions.
What To Look For
Parents have to think of their adult children as adults. Even if they have not always proven themselves to be the most competent at managing money at 20 years old, they may be forty-five now. This is not the time to remind your son or daughter what a screw-up they were when they in their thirties, or how they got into too much trouble when they were younger and you had to bail them out. When you are having these difficult discussions, you’ve got to separate out the old from the new as well as your worries about the future and keep it in the present.
Outside Help
While it might not always be the thing to do, it is not uncommon for financial professionals to be brought in to instigate and facilitate these conversations.
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If you have the right person, it can be extremely helpful. Reed says he has to be comfortable doing uncomfortable things.
“Am I family counselor? No,” he says, “But my job as an advisor, depending on how they bring me in, is to be a catalyst.”
Reed recalled a recent case in which a client who has nine kids, four of whom he works with, asked him to reach out to his another son who was not a client.
“I need you to speak to him,” Reed recalls. “I heard from [someone] that she thinks that there are some marital problems, can you give him a call, and I just want to make sure that he is OK."
Quick Fixes
Whether it is you or your financial advisor, who is doing the talking, Reed says there are key items to look for when you’re worried about an aging parent.
The absence of a will or trust are some of the more common problems with older adults,” he says, “either that or they are twenty years old.” Long-term care insurance is also critical.
Many times, people in their seventies and eighties are afraid that they are going to outlive their money and they put all their money in the bank in CDs.
“I’m not suggesting that we rip everything out, you have to have liquidity, but CDs are not paying enough after taxes and inflation,” Reed says.
In these cases, he recommends a variable annuity that has two distinct accounts called Retirement Cornerstone.
“I can still have them invested in equity, but I have another sleeve which guarantees them income regardless of what happens in the equity portfolio.”
Gurney says “people have a difficult time perceiving themselves as others perceive them. They might think I still manage my money well. I can take care of myself. Losing control of one’s ability to take care of oneself is so threatening to our sense of ourselves, that we deny and distort reality to keep that image in place. It needs to be handled very carefully."
Still trying to remember what your own parents said to you about the birds and bees? It may work because you likely had some sort of embarrassing talk. On the other hand, the money conversation probably never happened.
Follow these steps sooner rather than later, and you can spend quality time with your loved ones--rather than helping them deal with an unexpected and unnecessary financial crisis.