Why You Should Talk to Your Adult Children About Your Finances

Have you had “the talk” with your children? No, not that talk you hopefully had with your kids when they were young. If your children are now adults and you’re nearing retirement or already in retirement, you should be talking with them about your finances and estate planning. 

You might be wondering why you should share such personal information with your children. After all, what you do with your money is none of their business, right? 

Actually, there are several reasons why your children need to know details about your finances. And sharing this information with them sooner rather than later will help all of you be better prepared for any issues that arise as you age that can force your children to get involved with your money matters. 

The truth about aging and your finances

A majority of adults—60%—surveyed by Fidelity Investments have seen family members or friends lose their ability to manage their daily finances as they age, and 40% said they have had to help manage their parents’ finances. Yet, only 9% of those surveyed think they could end up in a similar situation.

Of course, it’s easy to assume that losing financial independence only happens to others—that it won’t happen to you. The reality, though, is that there is a high chance that you will need help with your finances as you age.

• More than half of Americans turning 65 today will develop a disability serious enough that they will need daily help with the basic activities of living (including handling money matters), according to the Department of Health and Human Services. 
• The risk of developing dementia increases with age. According to the Alzheimer’s Association, 5% of people aged 65 to 74 have Alzheimer’s dementia compared with 13% of people aged 75 to 84 and 33% of people aged 85 or older. Even in the early stage of Alzheimer’s disease, the ability to handle money matters can be impacted.
• Even healthy adults experience a decline in their ability to manage their finances and make financial decisions as part of the aging process, according to the National Endowment for Financial Education. As a result, the risk of being financially exploited increases with age, especially if you don’t have family members who are aware of your financial situation and are helping protect you. 

‍

[ Read: How to Catch Small Money Mistakes Before They Become Big Problems ]

Scenarios when you would need support

The statistics above point to a need to prepare for the possibility that you will need help with your finances as you age. If you’re still not persuaded, consider these scenarios:

• If you are divorced or widowed, you will need your adult child (or another trusted family member) to oversee your finances if you have a health issue or cognitive decline that leaves you unable to manage your finances yourself. 
• You may need support with daily money matters even if you are married if you have to care for an ailing spouse and don't have the emotional bandwidth to deal with finances and negotiate with insurers and health-care providers on top of providing daily hands-on care.
• You need to have an adult child who is willing to step in when you die and help your surviving spouse stay on top of financial matters and navigate the probate/estate settlement process after your death or serve as your executor if there is no spouse to settle the estate.

‍

If you don’t have conversations about your finances with your children and lay the groundwork for them to get involved before any of these or similar scenarios arise, your children won’t have the information they need to help you. They might not be able to access your accounts to pay your bills. They won’t know what your wishes are. And a difficult situation will be made even worse because they won’t be prepared to handle it.

How to have money conversations with your kids

Talking about money might feel awkward for both you and your children, especially because it can bring up issues that are uncomfortable—namely, aging and death. So you might not want to start with, “When I die …” 

That doesn’t mean you shouldn’t discuss what your final wishes are (you definitely should). You just don’t want to scare off your children by focusing on worst-case scenarios initially.

Instead, start the conversation by giving them peace of mind. For example, you could say that the pandemic has prompted you to be better prepared for emergencies and that you want to share with them what steps you’ve taken. You could say that your accountant, financial advisor or attorney recommended that you discuss what sort of planning you’ve done for your future. Using phrases such as, “I want us all to be on the same page,” can help keep the conversation positive and productive.

What to discuss

Once you get your kids comfortable with the idea of talking with you about your finances, be aware that you don’t have to share everything with them at once. That can be overwhelming for them. And you might not be ready to share such detailed information yet. 

Instead, have a series of conversations. Start with information that is easy to share, such as where you keep important documents or which bank you use. Work your way up to more sensitive topics, such as what sort of support you might need from your kids if you need long-term care.

Keep in mind that you don’t have to share all the details of your financial planning with your children, such as who gets what when you die or how much is in your retirement savings account. 

However, you do need to provide them with this key information that will allow them to step in and help you with money matters if something were to happen to you:

• Whether you have estate planning documents—such as a will, power of attorney and advance healthcare directive—and where the documents are located (if you don’t have these documents, meet with an attorney to draft them as soon as possible)
• Your plans for retirement
• What sort of long-term care planning you’ve done and whether you’re counting on your kids to help care for you
• How you pay your bills and how they can be paid if something happens to you
• What sort of financial accounts you have (checking, savings, credit cards, retirement savings, brokerage account)
• What sources of income you have
• What sort of insurance policies you have
• Names and contact information for financial professionals you work with
• Final wishes

‍

Consider making a detailed list of your personal, financial and medical information. You could give it to your children or hang onto it and tell them how to access it and under what circumstances. By giving them as many details about your finances as possible, you’ll be giving your children peace of mind that they have the information they need if something were to happen to you.

‍[ Keep Reading: How to Figure Out How Long Your Money Will Last in Retirement ]