Most Parents And Their Adult Children Avoid Communication About Personal Finance, Study Says

NEW YORK (MainStreet) — The top reason the majority of parents do not discuss their retirement plans with their adult children is that they do not want them to count too much on their future inheritance, according to Fidelity's Intra-Family Generational Finance Study.

The study found that many parents also are not as concerned about their retirement as they should be with 70% who indicate they do not know how much money they will have to live on in retirement.

Adult children also significantly underestimate the value of their parents' estate by more than $300,000. This number more than doubled from just two years ago, when the estimate was off by more than $100,000 on average, the Fidelity study found.

"It's not surprising that parents appear to want to put off discussing money matters with their children as long as possible, especially when it comes to how much of an inheritance they stand to gain," said Lauren Brouhard, senior vice president of personal investing for Fidelity Investments in Boston. "They want their children to learn financial self-reliance."

The top reason cited by their adult children is that it would be upsetting for both parties, according to the study.

"The subject of money has been traditionally considered a private matter and many people feel awkward talking about it," she said.

Parents and adult children need to have conversations about retirement and eldercare planning early and often before any major decisions need to be made. One benefit of discussing money is having greater confidence in the plans chosen with 93% of the parents who have discussions with their children about wills and estate planning say it brought them greater peace of mind and 73% said it would help their children's emotional state of mind as well.

"Adult children also benefit from these conversations as they can learn about their parents' financial status and wishes in the event of an emergency where they may need to step in to execute financial and healthcare decisions on behalf of their parents," Brouhard said.

Adults of any age may have a reluctance to discuss financial matters, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling.

"Either age group may be open to a general conversation about money, but when it comes to specifics, both sides may bristle," she said.

The young professional probably isn't any more comfortable revealing his or her salary to mom and dad than they are with telling junior the details of their stock portfolio, Cunningham said. If that's the case, it's smart to compromise by at least covering the basics. The important things the adult children need to know are which legal documents are in place, where they are located, contact information for the family's lawyer, account and financial advisor and the account numbers for brokerage and financial accounts.

The most difficult part of the conversation may be around end of life decisions, she said. Ignoring it is not the solution, but adult children should be prepared to approach the topic gently.

"The children may be pleasantly surprised to discover that mom and dad are very on top of things – yet another lesson they can learn from their parents," Cunningham said.

The conversations parents are conducting with their children need to be more in-depth since 40% of parents indicate they have not had detailed conversations with family members about covering living expenses in retirement and an additional 15 percent have not had any conversations at all, the Fidelity study found.

The survey also found that 43% of parents indicate they have not had detailed conversations with family members about healthcare and eldercare expenses and an additional 20% have not had any conversations at all.

During discussions, family members should follow the "voice not vote" rule, said Brouhard.

"When it comes to finances, life is not a democracy," she said. "While family members should have a role in the planning process, make sure the ultimate decisions made are consistent with the dreams and wishes of the parents, who have worked hard building up their nest egg and deserve to chart the course of their retirement."

Advance planning can help parents determine who will have power of attorney or be the executor of their estate to avoid surprises.

"It's best to initiate family discussions earlier and ask as many detailed questions as possible," she said. "Advance financial planning can help families define roles, determine what conversations to have and with whom, leading to better emotional and financial outcomes for all involved."

- Written by Ellen Chang for MainStreet

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