Financial Planning Matters: Now is Best Time to Talk to Your Children and Grandchildren About Money


Steve Kohler, CFP®, CPFA and Nancy Kunz, CFP®, ChFC®, CLU®

As a parent, you have an important responsibility to inform your children about the importance of money management. Unfortunately, for many families it remains a taboo subject. According to a 2017 T. Rowe Price survey, 69% of parents have some reluctance when it comes to talking about money with their children. And only 23% of kids say they talk with their parents frequently about money.

Children often learn from the behavior of their parents, and the handling of money is no exception. Responsible financial choices by you and open conversations with your children are important in making sure that money matters aren’t foreign to them when they become necessary.

Setting up your children and grandchildren with good financial habits when they are young can save everyone from considerable stress. You can start by introducing basic principles like loans, debt and credit. Establishing these things early on can make all the difference in terms of loan approvals, credit scores, student debt and mortgages.

As they grow older, discussions about money will also help ensure that wealth can be successfully passed on to future generations to preserve your family legacy. For this, they will need to understand the concepts of saving, compounding, budgeting and charitable giving.

Having these conversations now can provide them with the necessary tools and expertise to create a financial plan that works for their own life goals.

Once they have accumulated their own money, explain the advantages of investing safely and how it can add up to huge earnings over the long run, especially when compared to low-interest savings accounts. When they begin working, be sure to discuss the benefits of company retirement accounts and employer matches. In addition, make sure you discuss other long-term retirement savings options like traditional and Roth IRAs, as well as their tax benefits.

When they are adults, talking to them about how you plan to disburse your estate after your death may be one of the more important conversations to have. Unfortunately, there is often a disconnect on this topic. A recent study by MFS, a money-management firm, found that the majority of Gen X and Gen Y respondents expected an inheritance to help with their own retirement, but less than half of baby-boomers agreed it was important to leave one.

That’s why it is so important for them to have their own long-term plan in place. They should begin thinking about their estates as they get older. Be sure to explain the importance of having a will, especially as their lives change. It can be a good idea to introduce them to your financial advisor to explain how they have helped you manage your money. Having these conversations now can provide them with the necessary tools and expertise to create and plan for their own financial future.

So, whether your children and grandchildren rely on your advice or that of a financial advisor, it is important that they know the importance of these five key areas of financial wealth building:

  1. Credit, loans and debt

  2. Saving and investing

  3. Financial planning

  4. Retirement savings accounts

  5. Estate and inheritance planning

Talking about money with family members can be awkward, but there isn’t any benefit to putting it off. The sooner they are informed, the better chance they have of being successful in their relationship with money.



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Steven Kohler, CFP®, CPFA

Senior Financial Advisor

Financial Planning Chair

skohler@dbroot.com


Nancy Kunz, CFP®, ChFC®, CLU®

Financial Advisor

nkunz@dbroot.com


This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root & Company, LLC. does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views

and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

All investment strategies have the potential for profit or loss. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses.

The impact of the outbreak of COVID-19 on the economy is highly uncertain. Valuations and economic data may change more rapidly and significantly than under standard market conditions. COVID-19 has and will continue based on economic forecasts to have a material impact on the US and global economy for an unknown period.


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