Talking Money

As British Telecom and the late, great Bob Hoskins once told us back when adverts were actually worth watching, “It’s good to talk.”

In recent years this motto has come to the fore, with many subjects previously seen as taboo, now being out in the open for people to discuss freely. Mental health, sexuality, and being a fan of Taylor Swift are no longer considered things that you should keep to yourself. But there is one topic that still needs to shake off its stigma.

Research from the “shop now, pay later” company Klarna suggests that a third of UK adults (32%) feel too uncomfortable to talk about money with peers, despite 44% worrying regularly about money. A fifth (21%) have never discussed personal finances with friends or family, with 34% feeling too awkward to bring up the topic.

The sad truth is that money can be a major cause of anxiety for people across the wealth spectrum. And, if we apply the same approach we’ve seen with other taboo subjects, much of that anxiety could be alleviated by simply talking more about it, especially with those we are closest to.

Start early

It is a widely accepted view that many of our behaviours and beliefs as adults are shaped by our childhood experiences.

One of the most deep-rooted beliefs we take forward from childhood is our attitude to, and understanding of, money. And with the education system in this country famously lacking when it comes to teaching financial literacy, the responsibility for this falls squarely at the feet of parents.

Even if you are not talking about money with your children, they are picking up cues from you, as you might have done from your parents.

So, try and encourage their curiosity in this area, maybe getting them to help with an online shop with a strict budget, showing them how you are saving for a big purchase, or for older children who don’t like to turn lights off, showing them what an electricity bill looks like.

Many parents want to give their children the best start possible as they head into adulthood, and some do this by making investments on their children’s behalf.

While this is a great way to help your children in the future, you should be aware that the children will generally become entitled to the assets on their 18th birthday, and in the case of Junior ISAs, they can start to make their own investment decisions from their 16th birthday.

For some parents, this realisation can be a cause of some worry, particularly if they have not prepared their children for this (or can remember what they were like with money when they were 18!).

One way of addressing this is to start talking to your children about their investments at a younger age, helping them to understand what they are invested in, and more importantly, why they are invested. The more understanding they have about both of these factors, the less likely they are to do something with the money that you would not approve of (results not guaranteed!).

You may also be able to continue to manage the assets on your children’s behalf when they turn 18, so long as they agree to a Specific Power of Attorney being put in place to cover those accounts.

As they head out into the working world or off to university, now is the perfect time to talk about things like budgeting, credit, and taxes.

Alongside the fun and optimism of starting a new chapter, this transition also leaves young adults vulnerable to easy credit, “shop now, pay later” schemes, and financial scams. A solid understanding of the basics will go some way to shield them from these.

As you and your children get older, the focus might move on to what will happen to your wealth when you are no longer around.

Any good financial plan should cover the transition of wealth from one generation to the next, and you may well be having conversations with your adviser on this topic every time you meet. But are you having the same conversations with your adult children?

Do they know what your intentions are around gifting while you are still around, or inheritance when you are not? Do they know who you have nominated as executor in your will (assuming you have made one), and what their responsibilities might be?

Having these conversations openly can increase the chances of your financial legacy being used in the way you had hoped and provide clarity for everyone involved.

Set goals together, grow old together

In a survey of 2,000 people by finance company Evolution Money in 2022, 1 in 5 people said they would rather speak to their current partner about ex-partners than discuss money matters with them!

It’s easy to see why people might dread these conversations with their partner; money is always high up in the “things couples disagree about” charts, and this isn’t surprising.

As we looked at earlier, most of our beliefs around money come from our early years, and unless you had an identical experience to your partner, there is a good chance that you have different views about money. This in itself is not an issue, but not acknowledging your partner’s perspective can be.

Finding a way to get you and your partner on the same page when it comes to money gives you a huge advantage when it comes to meeting your lifestyle and financial goals over the long term. But doing this requires communication.

One of my favourite ways to get these conversations happening, outside of your planning meetings with your adviser, is to schedule regular money/life dates, where you can sit down with a bottle of wine or a cup of tea to review your current situation together.

For some, this might mean getting “into the weeds” looking at statements and valuations, but the real value is in the bigger questions.

In order to get to some of those issues, try answering each of these questions together:

• How do you feel about your current lifestyle and spending habits? Are you spending enough money on doing the things that are important to you, and are you spending too much on things that aren’t?
• Do you feel financially secure and on track to meet your financial goals?
• What do each of you love spending money on?
• Does your money align with your values?
• How do you feel about work/the business, and what are you working for/towards?

When discussing these things together, try and keep an open mind as what you hear might not be what you expected. The point of this is to better understand your partner’s perspective; hopefully you agree on more things than not, and you can work on anything you disagree on.

Getting your priorities established and regularly checking in to make sure you’re working towards common goals is a great foundation for a long-lasting relationship.

Mum and Dad

Conversations about money with your parents can be difficult, but they are really important to have, especially as they get older.

It’s important to approach these conversations with empathy and sensitivity, as your parents may be hesitant to discuss their plans with you. But there is also a good chance that they’re already thinking about these things and might be wondering how to talk to you about them.

Offering them a chance to talk openly could provide them with some comfort, knowing that you understand what they are trying to achieve.

Discussing topics like wills and Powers of Attorney (POA) can help ensure their wishes are known and legally documented. Knowing your responsibilities as a child, executor, or attorney can also prevent potential conflicts and confusion in the future.

Inheritance Tax (IHT) may be another important thing to bring up with your parents. They might hate the idea of paying more tax to HMRC when they die, but don’t know what to do about it. They might also be considering how to pass on their assets and whether they want to make gifts earlier to see their children and grandchildren benefit from them during their lifetime.

If you have siblings, consider bringing up the conversation together. Involving everyone in the discussion should limit misunderstandings or misreading of intentions, which should help to avoid potential squabbles in the future.

So, let’s get talking more

Navigating these conversations can be tricky, but the rewards are huge. You can help build strong financial foundations for your kids, get more aligned with your partner, and ease the burden on your parents.

Ultimately, these discussions should lead to greater financial security, trust, and understanding for everyone involved.

If you need help getting these conversations started, or need someone to facilitate or mediate, speak to your adviser who should be able to support you.

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