BY RICHARD BLOOM
More than 22 million adult children between the ages of 18 and 34 are living at home with their parents.1 This phenomenon is partially driven by the financial realities facing 20-somethings today, but it also illustrates the strong ties that exist between boomer parents – who have been scrutinized for “helicopter parenting” – and their boomerang kids. The U.K. Journal, Psychologist, found that more than half of millennials phone, text or email their parents nearly every day.2
Despite communicating frequently and openly about everything from playground gossip to conflicts at work, however, one topic families continue to avoid around the dinner table: money.
With more than one-third of millennials admitting to finding it difficult to start conversations with their parents about saving and investing,3 it is hard to imagine millennials addressing the more sensitive (yet necessary) conversations, such as estate planning. Here are some rules that apply specifically to some of the challenges parents face when talking about money with their adult kids.
1. Be smart about how you support.
No matter how old or “grown up” your child is, it’s a mistake to think that a parent ever ceases to be a parent. You will always have a responsibility to mentor and guide your children as they tackle life’s many obstacles. However, this unconditional support does not necessarily need to extend to the financial realm. The proverbial financial cord may never be severed completely, but it is often in your child’s best interest for them to establish a certain level of financial independence.
2. Create a culture of “family partnership.”
Glenn Kurlander, Head of Morgan Stanley’s Family Governance and Wealth Education unit, notes that, “one of the biggest concerns I have encountered among parents with considerable means is the fear of raising entitled children.” He believes that the best way to prevent this sense of entitlement is to create a culture of family partnership. In other words, driving the philosophy that “we’re all in this together,” and that while you are prepared to use your family’s wealth to help your children in meaningful ways, you are not prepared to remove every obstacle or challenge from their path. Denying your child the opportunity to learn some life lessons on their own (even if it’s the hard way) could end up hurting them in the long run.
3. To trust is relative.
Trust is an important component of any conversation related to money. While you may trust your children and their ability to make smart financial decisions, you may not necessarily trust the people they choose to listen to. Because it’s impossible to know who may influence your child in the future (perhaps when you’re no longer around to make your case in person), you may want to consider using certain wealth management structures (such as trusts) to protect the family wealth. To avoid resentment and confusion in the future, it is important to explain your rationale to your children: make it clear that your primary objective is to protect them and your family’s interests – it is not a reflection of a lack of trust or a desire to limit their financial freedoms.
4. Family finances are never one-size-fits-all.
As parents, you will have to decide what’s “fair and appropriate” for your unique family. This is particularly relevant when it comes to estate planning. In some families, “fair and appropriate” may mean giving equal amounts to each child; in other families, fair may mean treating each child differently based on their individual needs or challenges.
Use your resources, even the small ones.
Even when your children have children of their own, it’s not too late. In fact, this momentous event in their lives may present an opening: a timely reason to start a conversation about the family finances. Whether you want to encourage your children to become more fiscally responsible themselves, or address sensitive topics such as your own estate plan, grandchildren can help break the logjam and diffuse the situation: “Now that there’s another generation in the picture, we want to make sure that you are planning appropriately and responsibly for them.”
Whatever challenges you face or conversations you need to have, a Financial Advisor can act as a resource and a buffer. They can be present to facilitate the discussion in person, or help you prepare talking points in advance.
FOOTNOTES
1. “Helping Adult Children”, Pew Research Center (2015)
2. “The Ascension of Parent-Offspring Ties”, Karen Fingerman. Psychologist Journal. Vol. 29. (Feb. 2016)
3. Millennial Money Study, Fidelity Investments® (2016)
DISCLOSURES
Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.
Richard Bloom is a Financial Advisor in 1290 Avenue of the Americas, New York, NY 10104 at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at Richard.Bloom@morganstanley.com or by telephone at (212) 893-7597.
This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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