Talking about money in families can be tricky.
With $3 trillion dollars set to be passed down from the baby boomers in the next 15 years, getting a financial adviser in on the conversation could be a smart move.
Talking about politics and religion is considered impolite at the Australian dinner table – but with intergenerational wealth a hot topic, talking about money is fast bumping up the rankings in the taboo stakes.
It is easy to understand why.
Australians in retirement have worked hard to grow a nest egg and they want to take a step back from the financial responsibility of supporting their children. And deservedly so. The children have been raised, their education is complete and the children are in the workforce.
Hopefully there are has been some financial independence fostered so kids will not expect their parents to clean up their own financial mistakes.
Parents can now start planning for their retirement and as part of that, it’s worth having some honest conversations around expectations so that mum and dad can enjoy their nest egg.
It is not difficult to see that there is the potential for these conversations to get emotional and that is why it’s worth sitting down with a financial planner who is objective.
The trends in demographics are having significant pressures on retirement funds. Cost of living pressures, changes in life expectancy and a changing work force mean that parents and their children are leaning on each other for longer.
For example, high house prices mean that more first home-buyers are relying on parents to help them get a foot on the property ladder. In fact, the bank of mum and dad is now in the top ten home lenders in Australia.
Selling the family home can have impacts on other family members if they have expectations of receiving something from the sale and they may end up disappointed.
Or take inheritance. Longer life expectancy means that more Australians are either not getting an inheritance or they are getting it later than in the past. In some cases, the financial burden for the costs of health or nursing home care is falling to the children.
The conversation is not easy. But it is important.
Tips for having a conversation about money:
- Sit down with a financial planner who can be objective about money and take the emotion out of the conversation
- Express your expectations and wishes clearly
- Acknowledge that money can quickly become an emotional subject
- Make sure that all the legal and financial arrangements are in place
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