How to Discuss Finance with Parents – A Guide to ‘The Money Talk’

As I embarked on my journey of managing personal finances, I looked at my numbers and tried to figure out my life ahead.

One thing I realized soon was that I had to consider my ageing parents, as well.

Is this necessary? Maybe the following study has the answer to our questions.

According to Cision, a news article by the Financial Consumer Agency of Canada encouraged parents and children to talk about finances during these difficult times.

This was suggested upon the release of the financial literacy results from the 2018 Programme for International Student Assessment (PISA) survey.

Findings revealed that 15-year old students who talked about money with their parents every week ranked higher in financial literacy than those who did not.

Parents are our teachers in life, no matter how old we get.

They guide the younger generations, and having the reverse, translates into a form of disrespect for the former.

It is established that our elders know everything about how money works.

Money is a complicated and delicate subject for most people, so by approaching them, it gives off the impression that they are doing a lousy job of it.

Still, building a financially secure future is essential and something we should not hold back on.

Let’s get back to my situation.

Unaccustomed to participating in discussions about money matters with family members, I accepted that the conversation was going to be uncomfortable before it even began.

As a grown-up, I knew I had to tackle this awkward, ‘taboo’ subject somehow.

It wasn’t easy, but I did it.

My Story

First, however, a bit of background.

Over the years, my personal finance story provided me with a wealth of knowledge, including earning my way through college, saving every single cent I could, and brown-bagging lunch to work so that I would not have to visit the cafeteria.

I started saving for the future, and in the middle of all this, I often wondered about my parents.

As soon as I stepped into the corporate world, I began monitoring my income vigorously and creating budgeting worksheets with precise needs and wants.

I followed the 50/30/20 rule that involved allocating my money towards paying different expenses efficiently.

All I had to do was categorize my spending into needs, wants, and savings. 50% of the money I made in after-tax income paid my bills, car expenses, and groceries, meaning that there was no way I ever compromised on this amount.

Bills don’t wait, right?

My wants, aka optional spending, included my gym and Netflix subscriptions, or any trendy outfits I spotted while window shopping.

Luckily, I resisted the temptation of ringing yet another H&M cash register by getting my hands on ‘great buys’ or ‘discount offers’ more than once.

To me, my gym and Netflix subscriptions were also necessities in a way.

Working out and watching Anya Chalotra in ‘The Witcher’ were two ways I could stay sane after a long, hard day of work.

Needless to say, the remaining 20% went towards savings. I also kept some cash aside as an emergency fund.

This was how I operated.

Seven years down the line, I knew I had to speak to my parents who have always been good with managing cash flows.

My mom often reads up on ways to invest, and my dad practices frugality whenever he can. Still, I was genuinely interested in knowing how they were doing with their money, and to what extent did they expect financial caregiving from me.

First, however, a bit of background.

Over the years, my personal finance story provided me with a wealth of knowledge, including earning my way through college, saving every single cent I could, and brown-bagging lunch to work so that I would not have to visit the cafeteria.

I started saving for the future, and in the middle of all this, I often wondered about my parents.

As soon as I stepped into the corporate world, I began monitoring my income vigorously and creating budgeting worksheets with precise needs and wants.

I followed the 50/30/20 rule that involved allocating my money towards paying different expenses efficiently.

All I had to do was categorize my spending into needs, wants, and savings. 50% of the money I made in after-tax income paid my bills, car expenses, and groceries, meaning that there was no way I ever compromised on this amount.

Bills don’t wait, right?

My wants, aka optional spending, included my gym and Netflix subscriptions, or any trendy outfits I spotted while window shopping.

Luckily, I resisted the temptation of ringing yet another H&M cash register by getting my hands on ‘great buys’ or ‘discount offers’ more than once.

To me, my gym and Netflix subscriptions were also necessities in a way.

Working out and watching Anya Chalotra in ‘The Witcher’ were two ways I could stay sane after a long, hard day of work.

Needless to say, the remaining 20% went towards savings. I also kept some cash aside as an emergency fund.

This was how I operated.

Seven years down the line, I knew I had to speak to my parents who have always been good with managing cash flows.

My mom often reads up on ways to invest, and my dad practices frugality whenever he can. Still, I was genuinely interested in knowing how they were doing with their money, and to what extent did they expect financial caregiving from me.

Money Topics At Home

Some parents worry that full disclosure of their financial circumstances can add more stress to their children’s lives.

It is especially true for parents struggling with poor financial planning, or those who feel that they have insufficient knowledge of handling money.

Convincing them to open to us is an effective method towards building a financially sustainable household, and everyone benefits from the learning process.

Adding real-life experiences as examples also leads to a smooth, comfortable conversation. In any case, we should never avoid the subject.

Let’s consider life here in Singapore.

Providing parents with an allowance is something we have been taught to do at a young age.

It is how we Asians show love and care.

However, as we marry and have children, and our parents get close to retirement, we begin to wonder.

Managing two households adds to financial stress and our problems are compounded by the fact that the costs of living in Singapore are showing no signs of slowing down.

It is a place where people aged between 30 and 60 all too familiar with the concept of the sandwich generation.

We are typically working adults who have our children and elderly folks relying on us for financial assistance.

Residing in a country that ranks among the top five in life expectancy means that there is a lot to rejoice about, but also mental pressure.

While there is a huge burden on the working population to care for the elderly, many Singaporeans are making efforts to ensure sufficient savings to cover their ageing parents.

The key takeaway? A little bit of financial literacy never hurts.

Choosing the Time and Place

Timing and location are crucial. Before asking my folks about the financial or retirement plans they made for their future, I thought about when exactly I should have a conversation with them.

Of course, my efforts would have backfired if I chose the wrong moment.

Generally, folks tend to be more receptive when they are rested and relaxed. Also, holding off the conversation is a good idea if people who shouldn’t hear it are around, especially during family gatherings.

I avoided public places such as parks and restaurants and chose a meeting spot that offered the most privacy.

There was no place like home.

I also didn’t jump the gun because my dad liked his alone time, which meant that I had to be careful not to interrupt his personal space.

Keeping emotions in check would have been difficult otherwise, and I didn’t want to earn the Estranged Daughter badge.

It was easy to get defensive about money, and especially since my folks needed enough to cover their future medical costs.

What if they had lifetime healthcare needs or specific treatment preferences that their doctors and I had to know about? Why risk getting myself into a power struggle with my mom and dad that might have made them dismiss the subject altogether?

Getting the Ball Rolling

I mustered all the courage I could find and approached them directly.

My first step was to check if they were in a good mood and had the energy for this type of discussion.

I chose to initiate the conversation one fine morning after a good night’s sleep and an excellent breakfast.

Either way, I required their full attention, so I made my decision based on when they were alert, functioning best, and most likely to remember things.

Next, I thought about a simple icebreaker that made the conversation flow more naturally.

I started with a question that put the spotlight on them and their wishes.

I asked something along the lines of “Mom, have you given any thought to a comfortable retirement plan?”

It got both her and dad thinking about how they envisioned life to be ten years down the lane.

They gave me clues about their financial situation and whether they were prepared for the lifestyle they had in mind.

Also, I was not disappointed when my parents initially hesitated to open up to me. I had to be careful not to pressurize them into giving me more information than they were willing to reveal.

If I believed that such sit-downs are always one-off, I probably needed to take a long look at things before getting into anything remotely close to finance.

What to Discuss

I had a plan and created a checklist to simplify the process.

My foremost concern was making sure my folks had the necessary documents in order so that I, or the designated party, could easily and readily access them when needed.

I reviewed the following with my parents:
Will
Did they make a will? If so, where is it located? It is important because it clearly outlines their wishes and can save a lot of confusion over who gets what when they pass.
Accounts
Have they made a list of their savings, checking, and investment accounts? What are the names, addresses, and phone numbers of the institutions associated with these accounts?

Personal Documents
Where do they keep important papers, such as birth and marriage certificates and Social Security numbers?

Life Insurance
Do they have a life insurance policy? A contract offers a lump-sum payment to named beneficiaries upon the death of the insured person. This money can help cover burial expenses or any loss of income.

Disability Insurance
Did they apply for one? It is a form of income protection insurance that provides income to pay for expenses if a person is physically unable to work.

Healthcare Proxy
It is a document that designates a power of attorney to make healthcare-based decisions on our behalf if we fail to do so.

Retirement Savings
Have they set any aside? It ensures that one has enough money to enjoy a reasonable standard of living when they partially or completely stop working.

It also helps if there are reasons such as fewer organizations offering pensions or not wanting to depend on Social Security.

Moreover, according to SpendMeNot, most experts agree that a person should have 8-10 times their current annual salary in retirement savings before they reach 60.

Debt
Are there any outstanding debts owed? If so, there are two possible scenarios. Debt may be discharged in death, or the responsibility of paying off the debt goes to the estate.

If a joint account holder is involved, they will most likely manage the debt.

Planning Ahead

Talking about finances with our parents is not simple, but will provide peace of mind for both them and us.

It will result in more options that can help us make informed decisions when it comes to healthcare, housing, and legal matters.

It also reduces the likelihood of taking drastic steps, especially during unforeseen events. Take the example of the current pandemic that has unleashed a global frenzy of overspending at the wrong places, whereas the money could be invested in healthcare plans.

Furthermore, planning can prevent family conflicts and ease the emotional stress that naturally comes with ageing.

When approached the right way, our parents will realize that we have good intentions where their financial security is concerned.

We must let them know that they are in control of their resources and note any potential fears or concerns they may have to avoid causing them discomfort.

Let’s say we suggest a continuing care retirement community (CCRC) that meets needs, such as assisted living, independent living, and nursing care all in one place.

It turns out that our folks are against this idea, but we have already prepared ourselves for a negative answer.

We explain the facilities that they will have access to, such as fitness centres or transportation to recreational sites for senior citizens, shopping malls, and places of worship.

While such things make our case more robust, we must never disrespect their views and give them a chance to consider every possible option before taking any action.

The Bottom Line

Having financial affairs in order at the earliest makes for a wise move.

The longer we wait, the trickier the process becomes.

So, remember to start small and stay calm, and it will make things easier for everyone.

Construct a strategy that works for your family dynamics, and emphasize the benefits of the talk.