The "Financial Talk"

The "Financial Talk"

May 18, 2022

Just as the birds and the bees talk was difficult during the teenage years, talking to your adult kids about your finances seems to bring the same angst. Unfortunately, adult children are often left making difficult decisions for their aging parents with little or no information, making the “financial talk” as life-changing as understanding the birds and the bees.  

While we initially think these situations come into play with health issues such as a decline in mental or physical conditions, other scenarios could quickly come into play. Maybe you have an emergency while traveling, have been displaced by a natural disaster, or are concerned about the increasing nature of financial fraud and abuse. Being organized, planning, and talking to your kids in advance can prove beneficial if you need to turn to them for future assistance.   

When to Start the Conversation

The time to talk to your kids about your finances may never seem right. In fact, according to studies, 70% of family money conversations are put off until a health crisis or other emergencies force the conversation. Of course, as planners, we believe you shouldn’t wait for an event to start the conversation. Based on experience, the international caregiving company Home Instead Senior Care® recommends that the earlier these conversations begin, the better. 

Try the “40-70 Rule” for those who need a rule of thumb. If your kids are 40 or you are 70, it’s time to start talking. Think of this as the beginning of many conversations; it shouldn’t be a one-and-done. The idea is to break the ice now before a crisis occurs and arm your kids with information that will help them help you in the future. While we believe sooner is better, it is never too late to start.

How to Break the Ice

Since the financial conversation can be overwhelming for both you and your adult children, start with a broad overview. Layout a framework with a focus on your general philosophies about money management. Review your overall financial goals and your estate plan. If you are currently working with a financial planner or an investment manager, introducing your kids to your advisor is a great first step. 

We suggest you initially avoid getting bogged down in the nitty-gritty details. Instead, have a list of your assets and obligations with account numbers and contact information for any professional advisors in your life. Let your kids know where they can access the information when or if it is needed. Back in the good old days, paper trails of documents were easy to come by. Today, even seniors have started to embrace our electronic culture and e-delivery. Don’t forget to let your kids know how they can access your electronic records.

Keep in mind that routine life presents new circumstances that, in effect, change plans. Each time you adjust your plan or as you continue money talks over the years, you can share more information and eventually get more specific. 

Make it Official: Add a Trusted Contact

It can be challenging to feel secure with the frenzy of stories surrounding financial exploitation and financial missteps by the aging. Many financial regulators and financial custodians are taking these situations seriously and have enacted a series of rules and regulations as a step in the right direction to help protect senior citizens. As a result, many custodians have added the option to designate a trusted contact.  

A trusted contact is a person you authorize your financial firm to contact in limited circumstances, such as if there is a concern about activity in your account and they are unable to contact you. Naming a trusted contact gives your financial advisor or custodian permission to speak with the contact when account activity seems suspicious. Your trusted contact can confirm your current contact information, discuss your mental or physical health status, and discuss activities or other possible red flags that might indicate you are being financially exploited.

It is essential to understand a trusted contact does not act on your behalf. A trusted contact cannot view your account information, execute trades, or inquire about account activity.  If you want them to have that authority, you need to add them as an authorized party. Nevertheless, at a minimum, if you are aging, it is best to add someone that you trust, whom you believe would respect your privacy and would know how to handle the responsibility.

Bottom Line

Talking about the often-taboo topic of finance can be challenging but often proves valuable in the long run. You may find the very children you raised, loved, and provided financial security to as they grew up, are now grown and maybe in the situation to be a caregiver to you, their aging parents. Discuss your finances with them in advance and give them the tools they need to help guide them. Let’s face it, as parents, that’s what we want to do; give our kids the knowledge they need to succeed in the situations that life presents.

This material is provided as a courtesy and for educational purposes only. Investing involves risk including loss of principal.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. This article contains links to articles or other information that may be contained on a third-party website.  River City Wealth Management is not responsible for and does not control, adopt, or endorse any content contained on any third-party website. The information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Past performance is not indicative of future results.