It might come as no
surprise that Americans’ confidence in achieving their financial goals and
their optimism about the country’s financial future has declined significantly
during the past five years. But despite their concerns, many people are failing
to discuss key financial issues with their families, according to a study commissioned
by Ameriprise Financial.
The economic downturn has
had an especially significant impact on baby boomers. According to the Money Across Generations IISM
study, about half (49%) of boomers say they are optimistic about the financial
future of the United States, down from two-thirds (64%) of those surveyed in
2007. And despite their relative youth, boomers’ children (primarily members of
Gen Y and Gen X) also report significant declines in their perceived ability to
reach key financial goals.
So if adult children and
their parents are supporting one another financially, how often are they discussing
their money worries? It turns out, though boomers are much more likely
to report that they regularly discuss money matters with their family than they
were in 2007 (50% vs. 39%), these conversations are only scratching the
surface. In fact, four-in-ten boomers (41%) admit they haven’t adequately
discussed their current financial situation with their children and one-quarter
(27%) say they rarely or never discuss retirement.
If your family tends to put
financial discussions on the back-burner, approaching them now among
challenging economic times may be intimidating. Keep the following tips in mind
as you navigate these conversations.
1. Communicate your own financial plans.
It’s important to make your immediate family members aware of your short- and
long-term plans. Share any major financial and lifestyle decisions, including
if you’re planning to travel or relocate in the near future or during
retirement, what arrangements you’ve made for future health care needs and any
legacy plans you have in place. If you’re currently providing financial support
to a family member (or plan to in the future), speak honestly and set realistic
expectations. Be clear about your ability to contribute funds for their
specific financial goals or to provide support if your relative has a financial
emergency like an unexpected job loss.
2. Let them know what they can expect in
the future. It’s crucial to be upfront if you anticipate
needing financial help from your parents, adult children, or siblings in the
future. If you’ve identified a shortfall or may need financial assistance if
certain circumstances arise, make them aware of this immediately. Discuss their
ability and willingness to help and if needed, explore other options together.
If you feel good about your financial situation, offer any financial truths
you’ve learned along the way that may help them as they plan and save for their
own financial goals.
3. Plan for the unexpected. An
unexpected disability or death has the potential to greatly affect a family
member’s financial situation and may even leave you with unanticipated
responsibility. Ask if they have life and disability insurance, and if they’ve
established a guardianship plan for their children in case of a tragic event.
Also share with them the plans you’ve made. Provide information on where
important documents such as wills, a written power of attorney, financial
statements and contact information for your financial professional, lawyer and
accountant can be found.
4. Listen and understand one another’s
values. Whether you and your relatives usually agree about
politics, religion or financial habits, it’s important to respect their wishes
and allow them to follow their own path. Come to a mutual understanding about
when financial conversations are appropriate and what types of financial
decisions should be communicated between both parties.
Many families find it
difficult to have financial discussions. But while these conversations can
cause tension and lead to tough decisions, it’s easier to have them before an
unexpected event occurs or hasty trade-offs have to be made. Consider inviting
your adult children or parents to join you for a meeting with your financial
advisor if you have one. A professional’s objective viewpoint can be especially
valuable for financial conversations between generations of family members. For
more information about the study, visit Ameriprise.com.
###
Alfred G. Osbourne CFP®, CPA, MBA, CRPC®, CLU®. Advisor is licensed/registered to do business
with U.S. residents only in the states of NY, NJ, MI, VA, WV, CT, FL, GA, NC, SC, CA, TX, NV, AL, MD,
CO, IL, PA, and DE.
The Money Across
Generations IISM study was commissioned by Ameriprise Financial,
Inc. and conducted by telephone by GfK in December 2011 among 1,006 affluent
baby boomers (those with $100,000 or more in investable assets); 300 parents of
baby boomers; and 300 children of baby boomers at least 18 years old. The
margin of error is +/- three percentage points for the affluent boomers segment
and +/- six percentage points for the parents and children of boomers segments.
Brokerage,
investment and financial advisory services are made available through
Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and
services may not be available in all jurisdictions or to all clients.
©
2012 Ameriprise Financial, Inc. All rights reserved.
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