Why, When, and How to Talk With Your Children About Your Finances

Andy Baxley, CFP®, CIMA®, Sr Financial Planner

Talking openly and honestly about our financial affairs can be difficult. Having the conversation with our children can be even more challenging, especially if it’s a discussion the family isn’t accustomed to having.

Fear and uncertainty abound when it comes to being transparent with our children about our financial lives. What if it saps them of their motivation? What if it causes them to worry about our financial security? How do we have the conversation in a thoughtful way? When is the right time to bring the topic up?

None of these questions have a one-size-fits-all answer. Every family is different, and parents must grapple with these questions in their own way. That said, I do believe it’s important for every parent to think through the “why”, “when”, and “how” of this conversation. For reasons I will explain in just a bit, it’s simply too important to ignore.

Why parents should talk with their kids about money

The benefits of opening up to your kids about your money are numerous, and they will ultimately shift depending on which chapter of life you are in.

If you are a parent with younger children, you have an opportunity to impart some basic financial knowledge upon your kids. How can we differentiate between needs, wants, and wishes? What is a budget, and why is it important to have one? How does debt work? When can it be used for good, and when does it stand in the way of our goals?

While it’s one thing to preach about these topics in the abstract, it’s another thing entirely to show children how you navigate these questions in real life. Perhaps this starts with sharing basic information, such as checking account and credit card balances. As your kids grow and develop, they will be able to handle more complex topics, opening the door for you to cover things like investing, credit scores, and saving for college.

At some point, your child will become an adult, at which point they will have to come up with their own strategies for achieving financial success. This is a golden opportunity for your kids to learn about what their parents got right, what they got wrong, and what they would do differently if they had the opportunity for a fresh start. A little bit of transparency can go a long way at this stage, and it can have a meaningful impact on the trajectory of your kids’ financial lives.

Eventually, the value of financial transparency stops being all about benefitting the kids. Even if we hope to never rely on our kids for financial support, many parents expect their adult children to help manage their affairs if they are no longer able to do so. Further, it is often adult children who are responsible for settling their parents’ affairs when they pass. If you are anticipating asking your kids for help with managing your finances or settling your estate, financial transparency goes from “nice to have” to “mission critical”.

After all, chances are that your kids’ increased involvement in your finances will coincide with a very emotionally challenging time in their lives. The more we can do to establish clarity and understanding today, the less stress and anxiety our kids will experience in the future.

Finally, no matter what age you are, conversations about money present an excellent opportunity to share your philosophy around life and wealth. What is the highest and best use of money? What does it mean to be a careful steward of wealth? What does it mean to be generous? What are the responsibilities of one who gives wealth, and what are the responsibilities of one who receives it?

Hopefully by now you’re bought into the value of talking about your finances with your children. If so, you may be wondering when and how you should be having the conversation.

When to have the conversation

As unsatisfying as this will sound, there really isn’t a “right” answer here. Again, every family is unique and no two financial situations are the same. That said, here are some guidelines to consider when deciding on the timing of your family’s money conversation.

  • Are you ready for it? In other words, have you adequately addressed any fears or concerns you may have going into the discussion? Have you thought carefully about what you are (and are not) willing to share, and about what you’re hoping the conversation will achieve?
  • Are your kids ready for it? If so, what exactly are they ready for? Your five-year-old probably isn’t ready to learn about your investment philosophy, and your 25-year-old might not be either. It’s important to meet kids where they are in terms of maturity and financial literacy.
  • Have you assigned your kids important roles in your estate plan? If so, they should understand the role they are expected to play and at least the basics of how your financial life is structured as soon as possible.

Ok, you’ve decided that you’re ready to have “the talk” with your kids. You are clear on why you’re having the conversation in the first place and have thought carefully about what you’d like everyone to get out of it.

How to talk with your kids about money

Before we go into the structure of the conversation, I should note the importance of giving your kids some forewarning and gaining their buy-in to have it in the first place.

This might sound something like this— “your dad and I have decided that we’d like to have a conversation with you about our financial plan. We think it’s important for you to understand certain aspects of how our financial lives are structured, as well as any implications these factors may have on your life one day. Would that be ok with you? When would you like to have that conversation with us?”

It’s also worth mentioning that you do not necessarily need to be the one to lead the conversation. Your financial planner at The Planning Center has led many similar conversations in the past and would be glad to help with yours. Many of our clients have found a lot of value in planner-led family meetings.

In the previous section I talked about the importance of getting clear on the purpose behind your family’s money conversation. Whether you are leading your family’s discussion yourself or have asked your planner to step in and facilitate, your “why” is a great place to begin the conversation. Explain to your kids what you would like to share with them, and more importantly, why you think it’s important that you do so.

Next, invite them to share any thoughts, feelings, or concerns they may have going into the discussion and take some time to be open and honest about your own. It may be appropriate to simply acknowledge the fact that money can be an incredibly emotionally vulnerable topic to talk about!

Ask them what they already know about the information you plan to cover with them and what they are curious to learn more about. Take the opportunity to gently clear up any misconceptions they may have going into the conversation.

As you open up about your finances, check in with your kids often to make sure they are understanding what you are sharing. Invite them to offer commentary and ask questions on anything that isn’t clear. If anyone starts to get overwhelmed, take a break or plan to continue the conversation another time.

Finally, set the stage for future discussions. Explain that you hope this conversation will open the door for more like it moving forward. Ask your kids what they might like to learn more about and offer a preview of other topics you’d like to cover with them when the time is right.

If you’re feeling inspired to have a meaningful conversation with your kids about your finances, we’re here to help. Schedule a meeting with your planner any time to talk through your approach. If you’re not currently a client of The Planning Center and would like to learn more about how we can help facilitate this important conversation, you can schedule a free introductory call here.