Money Matters: Bringing Your Children into Conversations about Finances

Talking about finances

Do you talk to your children about financial matters? Your financial position can impact and influence many aspects of your life and the decisions you make. No doubt you speak about it with your partner or your adviser,  yet despite how it could impact their own lives, talking about personal finances in front of children can still be a taboo subject. It needn’t be. 

Experts say that helping children become financially literate is essential in the modern era. It has also been found that children who have not benefited from discussing financial matters with their parents are at a greater risk of mismanaging their own finances and personal budgets in their adult life.

Help your children become financially liberated

While some parents habitually discuss their personal finances with their children, many others struggle to establish comfortable boundaries in this area. A 2018 research survey revealed that while 95% of respondents agreed that parents should talk to their children about money, only 37% reported that they actually do this. Discussing personal finances can, invoke stress and anxiety for some, even in the most financially stable households. Many parents therefore shy away from such discussions with their children, even when they have reached an age of independence. When broaching the subject of finance with your children to ensure that they receive a beneficial and practical education about the nuances of personal finances. There are however, a few simple tips to follow.

Starting Early  

Being mindful of your child’s age and maturity is an important factor to consider when deciding when to begin sharing your own personal financial information. Children from the same family may follow very different timelines when it comes to their interests in the money matters, and have very different goals in relation to their own personal needs and finances. It is therefore important to be flexible in your approach to any financial discussions with your children to ensure they appropriately meet their needs.

Discussing the value of money with your children as they enter into the workforce is an essential step in ensuring that they develop proper money management practices. Many children are left without a practical understanding of money when they begin earning a steady paycheck. Consequently they can make many crucial errors. Discussing budgeting and savings practices with your children, before they begin earning a considerable amount of money of their own, is essential in order to place them in the best position to make informed decisions regarding their own finances.

As your children begin earning a steady income of their own, you may become privy to their personal motivations. If your child has shown an interest in developing a share portfolio or investing in real estate, discussing your own personal investments may prove to be a vital asset for your children’s success. Conversely, if you have a child who is interested in spending their money on travelling, you can tailor your discussions around your own personal budgeting practices.

What always needs to be discussed

Who will inherit what? This may be a question you might not be overly concerned with just now, but as you do think about it there are some matters that must be discussed. When they are at an appropriate age, it is important to discuss your Estate Planning strategy with your children. While you may not feel comfortable discussing the value of your children’s inheritance, it is important to discuss who will perform the key roles in distributing your personal finances when you pass away.

It is possible to inform your children of the existence of your various assets, including any shares or insurance that they may be unaware of, without telling them the value of these assets. Discussing how you have structured your asset portfolio can also prove to be crucial lesson to guide your children later in life. For example, if you have purchased any assets through a trust structure,  or any insurances through superannuation, you can discuss the benefits of such actions with your children.

Children can legally access their inheritance when they are 18. However, many choose to provide access to an inheritance once their children are aged 25-30. If you have chosen to grant your children access to their inheritance at a later age it is important to discuss your reasons why. Understanding your reasons for granting access at a later age, can prevent them from challenging the decision when you pass. At this time you may also discuss the circumstances in which your children will be able to access money from their inheritance, the executor of your estate and who you have appointed as your Powers of Attorney while you are alive. 

These discussions can be integral in avoiding challenges to your estate upon your passing.

Avoid potential issues

Children who are exposed inappropriately to financial problems can obtain a misconstrued understanding of their family’s financial position. They may become anxious and insecure about their family’s financial stability. 

Overexposure may occur, but there are a few simple practical differences between appropriate education, and overexposure. For example, when your children are younger may not need to discuss your salary with them. However, when your children have reached a mature age, it may become appropriate to discuss how your salary range has changed throughout your professional career. This can be an important lesson to share with your children, and will help them negotiate appropriate salaries throughout their own professional careers.

Ultimately it rests on your judgement to decide what level of information you think is appropriate to divulge to your children. When you do discuss such matters with them, considering your children’s financial position and goals as they mature is integral to ensuring you can provide them with an appropriate understanding of your own personal finances. It is this understanding that will benefit them as they work towards achieving their own level of financial independence. 

To discuss your current financial situation or how to introduce financial conversations with your children, contact one of our trusted Financial Specialists today! Please complete your details below and we will be in touch. Or give us a call on 03 9835 8200.

About the Author
Accru Melbourne , Melbourne
Accru Melbourne, part of the Accru group, is an award winning financial services organisation. Our highly personalised approach and dynamic advice makes us standout in the fast paced, ever-changing business world.
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