Talking Money

3 Minute Read

Most families avoid talking about money. But, by shying away from these discussions, you may stop younger family members developing financial life-skills, or miss the opportunity to properly understand the wishes of older family members for the future. Staying silent is also likely to make difficult money conversations even more uncomfortable when we’re forced to have them. 

Christmas and the holidays is a time for family. So, it can be a good time to kick-start or continue an ongoing discussion, encouraging openness and financial responsibility.

Learn from family successes and failures

Unsolicited advice is rarely welcome. But younger people can learn from conversations among their family members about financial success and failures. They are often even more likely to learn from the stories of their more relatable or ‘cool’ cousins, aunts or uncles rather than mum or dad. Being frank about financial challenges, options and outcomes can provide youngsters with helpful lessons on good financial behaviour. This may include mistakes you made when buying your first home, an investment that went sour, or the last time you really needed to use your emergency fund.

Andy Low, a Financial Planner with HSBC, says one of the best pieces of advice you can give your family is to save early and regularly. In one example, Andy shows how ongoing contributions to a Regular Savings Plan can add up over time. In 1997, an initial investment of $10,000, plus monthly contributions of $500, will have grown to almost $365,000 today. This is a simple yet important lesson he provides to relatives on the power of compounding interest.

Tie it to a gift

Look for an appropriate opportunity to begin the conversation. Christmas lunch or dinner is probably not the right time. Consider, instead, giving a present that teaches a financial lesson. Andy suggests a piggy bank for children, a small parcel of shares for young adults, or a financial book such as Scott Pape’s Barefoot Investor for a partner. “Each of these gifts can include a quick chat about saving and compounding, volatility and risk, or investment goals,” says Andy. “But, don't put too much pressure on this year's holiday money talk. Remember, this will be the start or part of a regular, open discussion about money matters.” 

Family hot topics

Andy says there are three topics clients are increasingly discussing with him:

  1. Parents would like to help their children purchase their first home. “These parents also want to understand how this may impact their retirement plans,” Andy says.
  2. Retirees are planning for a longer retirement. “Given the prolonged period of low interest rates and increasing life expectancies, people want to know how they can have a comfortable longer retirement.”
  3. Downsizing is also a popular topic. “Parents are considering selling the family home, with its big backyard, and trading size for flexibility.”

Christmas is also a time of year when scams are increasingly common, and older Australians are more vulnerable. In fact, people over 55 are victims of nearly half of all reported scams says the Australian Bureau of Statistics. Last year, Australians lost almost $300 million to scams, and that’s just the fraud that was reported. Andy recommends taking the opportunity while family are together over the holidays to ensure older members are especially aware of new and current scams.

Listen and converse, don’t debate

Your holiday money chat will not, and should not, solve everything. It allows you to express some expectations which you can refine through the year. It is also important to remember that these conversations can sometimes be challenging as they reinforce family roles and hierarchy. Indeed, we are bound to have some anxious and emotional responses to conversations with family, friends and strangers. 

Art Markman, a professor of psychology and marketing at The University of Texas, says that a lack of understanding can be a big part of the problem. “We have to shift our mind-set from trying to debate with the people around us to engaging in conversations,” Art writes.

“People have to cooperate in order to understand each other,” he continues. “As a result of this effort, people leave a conversation thinking more similarly to each other than they did when they started the conversation — even if they continue to disagree on the surface.”

It is important to listen, avoid lecturing and to respect other people’s point of view.

This is probably a good approach to any family conversation during the holidays, not just talking about money. But use the time to have some discussions around finance. Doing so can deepen family connections, and improve openness and understanding.