Schwab Exec: Families Need to Talk About Money

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BOSTON (TheStreet) -- Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation and senior vice president of Schwab Community Services, serves those roles at a company that bears her father's name.

Through speaking engagements and a Q&A column she writes for the firm's website, Schwab-Pomerantz is on a self-defined mission is to improve financial literacy and money management. As she sees it, those efforts need to be focused on families as a unit. Kids, parents and grandparents are increasingly dependent upon each other financially, yet seldom talk about money issues, sharing neither insight nor concerns.

Carrie Schwab-Pomerantz.
Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation and senior vice president of Schwab Community Services, is on a mission to promote family-based financial literacy.

Schwab-Pomerantz spoke to TheStreet from AARP's Orlando@50, an event attended by nearly 25,000 people. Her talk was titled Straight Talk: A Conversation About Families and Money, and she shared her thoughts on that topic.

The economic uncertainty of the past two years appears to have made people more serious about their money and more frugal. Is this a sea change, or just a temporary dose of reality and we'll all eventually revert to our old ways?

Schwab-Pomerantz: If you had asked me that a year ago, I would have told you, and probably wouldn't have wanted to be quoted, that we are going to forget about it. We tend to be an optimistic country and we've always overcome issues like this and come out ahead. It is in our DNA as a culture. But I do think the economy hit us really hard and deep. There will be ongoing after-effects.

Last year, we spoke to parents who have 20-something children as well as an elderly parent in their life. They said they feel a great deal of pressure right now between their own retirement and their kids' economic well-being. Most, or 80%, said they are concerned about their retirement and 41% said they are helping their kids financially.

So we asked these parents why they felt they were so many of them had to help the next generation, these kids who are supposed to be on their own by now. The top reasons were college debt and unemployment. They also brought up reasons, however, that really were the responsibility of the kids. They did overspend and they did overuse credit cards. In many ways, it was their own fault.

Is openly talking about money within a family something that is something of a taboo -- a conversation that makes everyone involved uncomfortable?

Schwab-Pomerantz: There is a need for families to have more frank and frequent conversations about money and investing. It is something we have to start talking about with kids as early as 5 and 6 years old. The topics change and evolve throughout their childhood, but the need doesn't end when they turn 18 or 21.

If you haven't had this conversation with your kids, it is never too late. You can still have these conversations with your 30-year-old, even a 40-year-old, for that matter. It needs to be a welcoming conversation. It is not like lecturing to your kid; it can be about sharing what you've done and sharing a philosophy.

It is not just kids who have bad financial habits; their parents often fall short of the thrifty nature of older generations.

Schwab-Pomerantz: We all have heard the statistics about the lack of savings in this country, especially for people over 50. We've done some studies that indicated many kids feel like their parents are not good role models when it comes to money. They don't walk their own talk.

The baby boomers overspent. They were indulgent on themselves and they were indulgent on their kids. Then you have the grandparents, especially those raised in the Depression era, who are disapproving of the habits they see in younger generation.

Are the husband and wives getting any better when it comes to working together on household finances?

Schwab-Pomerantz: Couples still need to talk more about money. Unfortunately, most conversations are more about disagreements than moving forward with a greater purpose.

Both partners are equally involved with their finances. They both need to at least know how much money they have, in what institutions it resides and what it is invested in.

You still see a lot of situations, however, where one partner handles the finances and the other is left in the dark. Money management and investing can sometimes feels like a mysterious, complicated and overwhelming process and when people don't feel they have a sufficient level of knowledge they tend to stick their head in the sand and say, "OK, you do it."

If you could be granted one wish to improve financial literacy in this country, what would it be?

Schwab-Pomerantz: It would be to make the conversation about money and investing hip, fun and something people want to be a part of. If only we could crack that nut, and talk about these things the way we do about music and technology.

It would be ideal if schools said that everyone has to have that knowledge before they get out into the work force or go to college. Then, everyone would be on the same page. This whole idea of overspending, going beyond your means and needing to have the fanciest of things, really starts young and can translate into adulthood, which is not a good thing. So the earlier the better.

Growing up, were there lessons you learned about managing money from your father?

Schwab-Pomerantz: What people don't know about me, and they often make assumptions, is that I grew up a billionaire's daughter. I did not. My dad was a struggling businessman throughout the 1970s. My father was divorced, so he was trying to support two families and start a business while the economy was at an all-time low.

One of the things I learned from my dad was the importance of savings. In my early days, I may not have been thinking about retirement, but I always had money saved so that I could make my own choices and have a sense of independence.

The importance of a work ethic is something I've passed on to my own kids. Even when I was very young, I was always working. I had a paper route and I baby-sat. I even tried housecleaning. When I was 16, I went to work for my dad and I worked for him during the summers.

Educating kids about money doesn't have to be overly complicated. My boys have had savings accounts since they were about 10. That's the sort of thing you have to expose your kids to. I remember opening up my first savings account at Wells Fargo when I was 9.

When my kids were 12, they opened up Schwab accounts and I talked to them about diversification and mutual funds. Studies show that people who are exposed to this sort of thing when they are young are more confident with working with a financial institution and working with investments.

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