Families Need to Have Frank Money Talks -- Now
During the financial crisis it's a good thing the money conversations of most American families haven't been broadcast on television reality shows.
It might have been tough to watch: Money in short supply, heavy debt loads and uncertainty about the future could have translated into more drama than viewers could handle.
Rather than let anxiety build further, this is an opportune time to stage a family "intervention" to air and deal with family money issues. This provides a chance for all members to openly share perceptions and concerns.
Go over spending patterns and debt. Explain how income is matching up with expenditures. Be frank about progress toward goals such as college and retirement. Don't scare everyone, blame anyone or distribute calculators, but do make each person feel like part of a financial unit.
Tough love by parents of all ages is the order of the day in a difficult 2010.
"When parents see irresponsible financial behavior in their adult children, I suggest they don't bail the children out from bad situations," advised
She and other planners have watched misguided generosity seriously endanger parents' own retirement well-being and keep adult children from living with the consequences of irresponsible behavior. Though it is painful for parents to see their offspring struggle financially, she emphatically believes they must resist helping them in cases when they have made poor choices.
Encourage responsible financial behavior early in youngsters.
"If you have four children and one asks for something, you really don't have to provide it because children don't have to get everything they want," said
An allowance is fine for children up to age 18, he added, but they should have responsibilities in order to earn it. They should also regularly have the relative cost of items explained, such as the price of a new pair of sneakers versus the bill for a restaurant meal, he said.
Parents must take time to communicate finances with children.
"One of the biggest family mistakes is that the children really don't know what is going on financially until the parents are dead," observed
Surprises that occur when everyone was kept in the dark can lead to long-term dissension among siblings. Another consideration in the current economy is that many parents are much more financially strapped than in past years, Evensky said. Those circumstances should be explained clearly to children, as well.
Communication between spouses is paramount.
Attitudes toward money -- especially personal tendencies toward spending or saving -- are formed through personal history. How respective attitudes mesh or collide has a direct bearing on all family life.
If there are differences of opinion on spending, the National Endowment for Financial Education (www.nefe.org) recommends a separate meeting between spouses on neutral ground, such as a park or coffeehouse, with no distractions. The supportive tone should be that you are partners in every way, including how you handle money.
It suggests an honest sharing of each individual's worries, starting with statements such as these:
"I'm afraid we won't be able to pay our bills."
"I'm afraid what my mother-in-law (or father-in-law) will think."
"I'm afraid we won't be able to purchase what our neighbors have."
"I'm afraid I'll feel like a failure if I can't buy the things I want."
Sharing lists should help you face financial fears constructively and take action to deal with them. You may even find your own reactions have been knee-jerk rather than thoughtful.
"One husband said his wife was spending more than he was comfortable with, so we did an analysis that showed what would happen if she proceeded along that path and she adjusted her spending," said Evensky. "But we also saw that she was really spending well within their resources and they actually could afford vacations and other things they'd postponed."
Honest meetings between spouses, as well as getting together the entire family, can clear up financial conflicts that usually surface during periods of extreme stress or anger. However, bringing in a financial professional for an intervention often makes sense.
"As a financial adviser, I can show the consequences of what they are doing, by looking at what they owe, their goals and their income," explained Capelli Dimitroff. "We often receive an 'ah-ha' response from the clients when they view the facts."
In some cases, money is a symptom of much deeper family problems and she then recommends outside family counseling. But that is the exception rather than rule, since most family financial issues can best be solved by talking calmly and openly about money.
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Personal Finance - Families Need to Have Frank Money Talks -- Now
(c) 2010 Andrew Leckey