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Americans have historically been reluctant to discuss financial matters among family members, but a recent study by Fidelity Investments found that attitudes toward taboo topics about wealth they move.
fidelity A study of the mobility of the state of wealth found that 56% of Americans did not discuss family finances with their parents when they were children. Of that group, 82% wish they had, because they think it would be beneficial to get financial education at an earlier age.
It also found that Americans’ attitudes about these conversations are changing, with 83% of respondents saying it’s important to talk about money management with children, and 67% of parents already talk to their children about family finances.
“Money and wealth is one of the topics that, notoriously, we just don’t like to talk about historically,” David Peterson, head of advanced wealth solutions at Fidelity Investments, told FOX Business. “Wealth is like a deeply personal experience, so in some ways it’s not surprising that people throughout history have been uncomfortable talking about it.”
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Americans’ attitudes toward once-taboo financial conversations are loosening, according to a Fidelity survey. (iStock / iStock)
“The study showed that people are kind of starting to break that cycle of avoiding family discussions. And so clearly, if we connect that with intergenerational transfer of wealthit’s kind of a generational difference, and what we’ve found is that older people in general — they’re just not comfortable talking about it,” Peterson said.
Peterson said many Americans have experienced the complications that can arise when a parent who wasn’t as open about their finances starts to fail and family members have to step in to help take care of their finances.
“When people start to get to the end of their lives and suddenly they can’t manage their own finances or they no longer have the capacity to make decisions about it, this is where you start to see things go a little bit sideways, because they haven’t shared with their families what their wealth is, where the wealth is, what it’s made of,” he said. “And you can very quickly find yourself in a situation where, during a really emotional time in life, people now worry about, well, how do you actually manage mom and dad’s finances when they can’t do it on their own anymore?”
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Peterson suggested that families approach financial conversations as a process, rather than trying to take care of everything at once. (iStock)
He said it’s important for families to have documents including health care or health care power of attorney for help navigating the health care system, as well as a living will with instructions about the individual’s hopes about it. A financial power of attorney that authorizes someone to act on their behalf in financial matters is another key document.
Families should also consider other end-of-life documents and designations, Peterson said. Brokerage accounts which can be jointly owned with rights of survivorship can be easily transferred to the surviving owner, while beneficiary designations can also be included to transfer the account after death to the beneficiary.
“You need a will, which will take into account all the things that don’t actually have ownership or a beneficiary designation on them,” he added. “And then, in some cases, it might be beneficial to have a trust and put the assets in that trust to pass, similar to a beneficiary designation account. The trust will then define who gets all of those assets that are in the trust.”
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A Fidelity study found that people with financial plans have more confidence in building and protecting their wealth. (iStock / iStock)
Peterson suggested that it might help if it is understood that it will not be a one-time conversation and more of a process that will ease the pressure and emotions surrounding those conversations.
“I think for some people it works really well to have a very strict schedule of what you’re going to talk about; other times it doesn’t, and my recommendation is don’t go into the conversation thinking it’s going to be one and done; conversations are hard to have,” Peterson said. “Look, I’m in business and I remember talking to my dad, who’s passed away now, and you’d think it would be easy for me, but it’s not, because these things are wrapped up in all kinds of emotions.”
Sharing some details about financial accounts and points of contact can also be a good first step, even if it doesn’t necessarily lead to full disclosure of the senior’s wealth details, he explained.
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“Given that older generations are not as willing to necessarily reveal all the details of their wealth, what I often recommend is to at least share what it is, not necessarily the amount, but where it is; who are the key people to contact in case a family member needs to know more about it and keep all that stuff in a place where people can easily find it,” Peterson said.
“Probably the first step is just making a really robust list of what’s there, a balance sheet, a statement of assets, a statement of net worth, whatever you want to call it – but just this list of things so that when someone has to act at least they know where to go,” he explained. “And in that way, you kind of protect this sensitivity around how much is in all these different accounts or banks or financial institutions.”
Regardless of the process that individual families use to create their financial plans, the Fidelity study found that planning is a confidence booster. While about four in 10 Americans worry about losing their wealth, 78% with a financial plan said they are confident they have taken the right steps to build and protect their wealth, compared to 26% and 27%, respectively, of those without a plan.
