When our older daughter went off to college, it was a shock to the household. We didn’t think things would be so different because our younger daughter was still home. Just as we were getting used to the “new normal”, the older graduated from college and the younger was a senior in high school with one foot out the door. We knew at that point that things were going to monumentally change for our family. As a result, we realized that we were all moving into a new era. The conversations needed to evolve from homework and college application deadlines to the more serious topic of money. How does a parent move the conversation from “Here’s your allowance, spend it wisely.” and “Here’s how you apply for student loans.” to high finance and investing? The solution at our house was the creation of “Family Finance Fun”.
Since 2014, this “event” occurs every year during Christmas break. The four of us sit down to talk about the nitty-gritty of money and finances. In addition, to put the fun into Family Finance Fun, we set up a fancy tea party in the dining room. Now we can sit for hours discussing the financial topics of the year.
Money, A Taboo Topic
You may be thinking, “What a fun idea!” More likely, you’re thinking, “You people are nuts!” Mixed reactions are common, and are often a consequence of how you were brought up and your philosophy about money. Money is one of those taboo topics that really shouldn’t be off limits. I mean, we’re not talking about sex, politics, or religion! Kids need to learn about money, saving, finances, budgeting, investing, loans, and the ridiculously complex financial system we have in America.
Where do they get such an education? They don’t. The problem for our kids is that financial missteps can be very costly. Sure, there is great value in learning from your mistakes, and there are plenty of mistakes our kids will make. However, some of the financial mistakes carry swift and far-reaching consequences that will affect their ability to get important loans, open credit cards, and buy a house at the best mortgage rates available. In other words, some of the financial missteps will cost your kids a small fortune.
Frankly, the financial systems in the US have changed more significantly than many parents realize. It takes some effort to figure out the latest structure of the system before talking to your kids.
The Financial System and Driver’s Ed
I liken today’s financial system to a Driver’s Ed situation. When we learned to drive (for me, a mere 40 years ago!), there were optional lap seat belts, windows that actually rolled down with a crank handle, and you were instructed to keep your hands at 10 and 2. The student got in a car with the gym teacher and everyone hoped for the best.
Fast forward to today. Parents are now required to attend a 2-hour training session on how to help teach their kids to drive. They get a lecture from a professional driving instructor and sign a commitment note that we will provide at least 25 hours of on-road driving instruction with our own child. Plus, we agree keep a log of our driving lessons that gets turned in during the road test.
One of the newfangled things the instructor told us: stop telling your kids to put their hands at 10 and 2! With the wide use of airbags in the steering console, you can’t keep your hands there. It’s now 9 and 3 or 8 and 4. Who knew?!
Family Finance Fun Guidelines
As a consequence, I pondered just how we should talk to our kids about money? The whole financial world is awfully complicated and can be overwhelming to young people who just got their first checking account or credit card or paycheck. What were the real objectives of this financial discussion?
For the first year, I simply set up a few general guidelines and created an agenda with four broad categories. First and foremost, this was a discussion for all four of us. Not a lecture from dear ol’ mom and dad. The topics had to be broad enough to allow for everyone to participate as one daughter was 23 and the younger was 18.
Next, we wanted this to truly be an open discussion, so all questions were fair game. We let the girls know that right away – – they could ask anything at all about our money. Third, the agenda had to be limited to one side of one sheet of paper. While we could go on and on, there would be other years to cover more topics.
Bottom line, we wanted to keep things relatively simply and open for a good conversation. We limited the discussion to the 3 or 4 key topics during our first Family Finance Fun tea party.
Our First Family Finance Fun Agenda
The goal of the first conversation was two-fold: to set an expectation that we were going to discuss money as a family; and, to share our values and philosophy about money. If the kids have a window into our values, it helps them better understand why we make certain decisions about how we spend or save our dollars.
It was an interesting exercise to think about how we should explain our philosophy about money. It’s not something we typically do. Over the years, we’ve all gotten into a rhythm and routine about money and how we run a household. Financial matters are just on autopilot. Knowing that we were going to have to share with our kids how and why we approach money the way we do was as much a re-evaluation for us as parents as it was a learning opportunity for our girls.
The four main areas we covered in our first family finance fun meeting were:
1. Some of our beliefs about money
2. Building your financial future
3. How we can help you financially
4. What you need to do well
Importantly, I liked this structure because we could fit in lots of specifics under the broad umbrellas. And, really, it wasn’t all that hard! Family Finance Fun is all about having a money conversation about what is important to you. You truly are laying a foundation for financial success with your children, even though each person may go in different directions over time.
For example, when talking about our money beliefs, we shared that we think having a budget (and working to stick with it) is really critical. My dad always said that money doesn’t grow on trees, and boy was he right! You only get so much from your paycheck and it has to go a long way. We told the girls that we believe that one needs to limit debt and live within your means. And, that it’s critical to protect your assets and investments.
To start building their financial future, we thought it was important for the girls to focus on three important things: service their student loans, build a 12-month emergency fund, and save aggressively for retirement even though they are only in their 20s. They did laugh at that retirement advice! “Really, Mom, we know what you do for a living!”
Financial Transitions Can Be Tricky
For many of us Boomers, we do continue to support our grown kids in some sort of financial manner. It wasn’t necessarily what we planned to do, but it’s really hard for the kids to get started these days. We wanted to be crystal clear with the girls what we were willing to do—or not—in terms of helping them financially.
Yes, we will continue to pay for their cell phones (after all, we are on the “friends and family” plan), buy their plane tickets to come home, and treat them to an occasional dinner out on the “mom card”. We’ll buy their first car, but then they are on their own. They can stay on our health insurance until 26, unless they get a better option. We especially wanted them to know that we expect them to make it on their own, but if they ever need a safety net, we are here for them.
And, for the fourth category, we put topics on the table such as the importance of building their financial literacy and knowledge, getting their financial statements organized, and setting up wills and health care proxies and beneficiaries. They are adults now, even if they enter adulthood kicking and screaming. We expect them to take the financial reins and put good habits in place. We felt it was important to let them know that.
Let Them Eat Cake
Having Family Finance Fun is more fun with cake. And, cookies. Tea and finger sandwiches are also important. My girls do love tea. Our annual tea party has been a wonderful excuse to sit down for concentrated time and focus on money. We just had our 5th annual Family Finance Fun conversation and it is remarkable how much easier it has become.
Simple steps make all the difference:
• Use the same basic framework of four broad categories each year
• Figure out the detailed financial topics we want to talk about
• It’s ok to repeat some topics if there is more to add
• Remember to grocery shop for the tea sandwiches ingredients
• Have everyone help make sandwiches and set up the tea
• Get ready for a lively conversation with great questions from the young adults
Pick a date and a food theme that works for your family. It could be a summer picnic or crockpot stew in the winter. Start talking about money with your adult children. I’m betting that it will make the really important conversations later in life much easier if you lay the foundation now. Good luck and let me know how it goes!
For more information:
There are books and such for helping little kids get an understanding of money. The Allowance Game was a favorite of ours when the girls were 7. For those entering adulthood, the conversation needs to be different.
Here are a couple of ideas that might help you get started:
• For their college graduations, I gave some of the young women I know a book called: On My Own Two Feet: A Modern Girl’s Guide to Personal Finance. There are lots of good books to help young folks get started in their financial life…pick what you like and make it a gift.
• Family Finance Fun is not meant to be about inheritance. At least not yet! But here is an interesting article with a good infographic that has pointers for talking money with your adult children: “Only 21% of parents have told their children how much inheritance they will receive.”