A family affair: Ensuring financial health across generations

A family affair: Ensuring financial health across generations

According to the PBS Web site Juggling Work and Family, almost 40% of U.S. workers have children under the age of 18.

In a 1998 national poll, more than half of Americans - 54% - said that they would likely be responsible for the care of an aging parent or relative in the next 10 years.

As a working-age adult, there's a high probability that you?re balancing work with commitments to both children and parents. Shuttling the kids to soccer, checking in on Mom and Dad, planning holiday celebrations or reunions for extended family - fulfilling your responsibilities as a parent and adult child can be difficult.

And while simply finding the time to spend with those you love can sometimes be challenging, making an effort to talk about money is crucial for the long-term stability of your family's finances.

Giving your children a firm foundation
While younger children may know how many dimes are in a dollar and older students may take classes that offer information on finances, your child's school may not include money management in its typical curriculum. Generally, parents are left with the responsibility of helping children develop good financial habits, including how to balance saving and spending.

One way to introduce the subject is to provide your children with an allowance with which they can buy "extras," such as toys and video games. Set a rule that no matter what, once that money is gone for the week, they won't be able to buy anything until next week's "payday."

Once they?ve learned how to budget, introduce saving for longer-term goals by encouraging your children to set aside a portion of their allowance for more expensive items or family gifts. You may want to open a savings account in which they can deposit these savings, as well as a portion of any money they?ve received for birthdays or holidays. At first, they may be reluctant to "spend" money on something that doesn't provide immediate gratification, but once they see the rewards of interest and how it grows their money, they will likely look forward to investing.

Ensuring your parents' financial health
Your parents may put up a good front, but it's possible they aren't as financially secure as they would like you to believe. The house they?ve owned for years may be causing a cash crunch as they make necessary repairs or cope with rising taxes. They may be dealing with increased medical expenses or worrying about how they will afford care in the future. Or, they simply may not have planned well enough for retirement and are dependent on Social Security, living from check to check.

The most important step to ensuring everything is okay is simply talking about finances. Many older adults don't want to be a burden and tend to brush concerns away. But discussing money while your parents are healthy and independent is crucial. Even if you are confident that your parents are financially fit, you may want to remind them that in the event of a stroke or other incapacitating illness, the burden of handling their healthcare and finances will fall to you. You will need real information to make certain that all is accomplished in accordance with their desires.

This is also a good opportunity to ensure your parents have completed basic documents and that you can easily access them if needed. At minimum, each parent should have:
  • A will or a living trust that includes instructions on how to distribute assets and functions as a will at the parent's death,
  • A living will that instructs how your parents are to be treated if terminally ill,
  • Durable powers of attorney authorizing someone to handle each parent's financial affairs if he or she is incapacitated, and
  • A healthcare surrogate document that authorizes someone to make healthcare decisions if your parents are unable to do so.
Of course, being in a position to educate your children and help your parents should be a result of the steps you?re taking to create a secure financial future for you and your family. By practicing what you preach you not only work toward your goal, but help those around you better understand the importance of sound money management.