Hey, Mom and Dad! Talk to Your Kids About Money

By Retirement Planning FOXBusiness

Forget the stereotype about today’s young adults being “slackers.”  It turns out, a significant portion of so-called “Millennials” (born 1980-1989) worry about financial issues on a regular basis. Half say they have started saving for retirement- a far cry from the financial nonchalance displayed at the same stage in life by their parents’ generation.

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As a follow-up to earlier research about how Baby Boomer parents and their adult children are- or are not- communicating about financial issues, Fidelity Investments conducted a second survey to “drill down” deeper.  The goal: to find out what (financially-speaking) keeps so-called “Millennials,” a.k.a. Generation-Y, up at night.  One of the most surprising revelations?   “This survey busted the misconception that retirement is not a priority for Millennials and too far into the future to begin saving for,“ says Fidelity senior vice president Lauren Brouhard.  Fifty-two percent said that accumulating more for retirement is one of their top financial goals, along with paying off student loans and credit card debt.

While one out of four young adults says they don’t trust anyone when it comes to financial advice, a 33% cite their parents as their most trusted source of advice about money, a somewhat surprising finding given the free-spending reputation of the Boomers. 

Speak to Me!

It turns out, although the Baby Boom generation has done a lot of things differently than their parents- especially in terms of child-rearing- many still resemble grandma and grandpa in their attitude about talking to the kids about money.  It remains a taboo topic in many families.

However, according to Fidelity’s research, 39% of their adult children worry about money at least once a week and are also “very engaged in this topic with their peers.”  The main complaint their kids have?  That mom and dad are not opening up on the subject.  While three-fourths of Gen-Ys say they don’t have any difficulty starting a conversation with their parents about money-related issues, roughly half feel they are not receiving any meaningful advice.

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The message for parents?  “Your children are looking to you for help,” says Brouhard, “but don’t feel they are getting it.”   She adds that while “parents prefer to wait until they retire, [their] adult children prefer to have this discussion earlier.  They want more information.  There’s a lot that the different generations can learn from each other.”

For instance, consider the issue of saving for retirement.  Perhaps your son or daughter is looking for guidance about what percent of their paycheck they should contribute to their 401(k).   Or how to invest it.  That might not be something some Boomer parents feel they know much about.  After all, given the number of Boomers reaching their 50s and 60s with shockingly little saved for retirement, their most commonly cited plan for funding this stage in life has become “work longer.” 

Where Has The Money Gone?

And, let’s face it, much of that spending baby boomers were doing in their 30s, 40s and 50s  benefited their children.  We can all think of parents who doled out thousands of dollars on special sports equipment (do you have any idea what hockey pads, skates, and a helmet cost?!), dance lessons, $400 prom dresses (worn once), the car “required” at age 16, etc.  Not to mention moving to a larger home (with higher property taxes) so the kids could be in a “better” school district (that coincidentally has a winning football team).  And, when did spending your senior year spring break in France become popular? 

When I grew up (full disclosure: I am a Baby Boomer), many parents felt a responsibility to contribute what they could to help cover a 4-year college education.   But these days more and more parents feel obligated to pay for graduate school.   There has been a great deal of attention paid to the crushing burden of student loan debt college graduates are left with, but when have you heard about the student loans parents are struggling to pay down in their 60s and later?  (More on this next week.)

The Price of Being a Soccer Mom (or Dad)

Most damaging of all to mom and dad’s retirement security?  One stay-at-home parent-typically mom.  This was necessary in order to provide transportation to the kids’ after-school commitments- sports matches, music lessons, swim meets, regional competitions, etc., etc., etc.

The average Baby Boom woman took 11 years out of the [paid] workforce for family caregiving.  For some, that time was used to help older relatives, such as parents.  But the lions’ share was spent on childcare.  And, for many, it lasted far beyond the age that their kids were in elementary school. 

I’m not suggesting this is a “good” or a “bad” thing.  Just pointing out that it has a price tag: significantly less saved for retirement and much smaller Social Security benefits.

Teach Your Children Well

Brouhard maintains that whether parents feel they’ve done a good job managing their own finances or not, there are still lessons they can share with their young adult children- even if it’s in the form of what not to do.   “If parents did a lousy job in saving for retirement, they can use themselves as an example and encourage their children not to follow in their footsteps, to be more committed to saving.”  She urges parents to “share their experiences and open up a family conversation to help both their children and themselves.”

This includes intergenerational issues, such as how mom and dad plan to pay for their retirement, the structure of their estate plan, their potential health care needs and what they expect in terms of elder care.  As Brouard points out, “These will impact the lives and decisions of children.”

For instance, knowing that mom and dad prefer to age in their own home as opposed to a retirement community might influence whether a son or daughter accepts a job in another state or chooses to remain close by in order to help.  If your daughter or son would like to return to work full-time but can’t afford child care, that could affect grandma and grandpa’s decision to spend the winter in a warmer climate. 

According to Brouhard, “When families open these conversations, it increases peace of mind.  [There are] better long-term financial outcomes because families are talking about issues that ultimately impact each other.”

The Advantage of Starting Early

According Brouhard, “The message seems to be getting through that [Millennials] need to think about long-term saving because they won’t have the same benefits past generations have had in terms of pensions and healthcare. They will have more personal accountability. They need to get in the game, save more and invest for long-term growth.”

Her advice to Millennials: “If you are overwhelmed or intimidated [about money] there are professional services available to get you started.”  This includes a special section on Fidelity’s website dedicated to this generation- https://mymoney.fidelity.com/content

“This is a call-for-action for this generation to make the time to prepare for the life they want to live.  They have the gift of time.”

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