by Judy Loy,
RICP®, ChFC® and CEO of Nestlerode & Loy, Inc.
I was recently at a Leadership Centre County (LCC) event and a friend mentioned my StateCollege.com articles. Further into the conversation, she lamented about people being unwilling to talk about money. “Money is a more taboo subject than sex,” and she heard that from someone whose job it was to help people set a budget.
When is it okay to discuss money? I would say it’s OK with close friends if you don’t compare yourself to others. All people have different circumstances, values and incomes, and that’s OK. My husband and I don’t have children, so this contributes to more disposable income. While we have expenses with our animals, our dog and cats will never have to go to college, play sports or want the latest fashion. You may wonder why your next-door neighbor can afford expensive trips or that shiny new car.
What you may not know is the debt they are carrying to afford their lifestyle. Maybe they do not save for retirement and think they will work the rest of their lives. Judging or comparing yourself to others has never got anyone anywhere. I don’t suggest taking stock tips or investment advice from friends or family. Their risk tolerance, circumstances and values may be different from your own.
I tell people it’s important as your parents get older to have a conversation about money. Nearly 7 in 10 seniors are targets of fraud according to Cooperative Credit Union Association (CCUA). To help older family members, it is a good idea to be aware of their finances and have open conversations. Also, knowing where important documents and accounts are —banking and investment accounts, wills, power of attorney, etc. — is better when you both can discuss issues early than struggling during an emergency.
Sitting down with your parent’s financial advisor is helpful so you are more aware of how their account is managed and who they are working with. Being a trusted contact on your parent’s investment accounts can be important if your advisor feels there are any changes in your parent’s investment behavior or if they may be the target of a financial scam.
It’s also important to impart financial knowledge to the next generation. An advisor can help with this as they have resources for basic financial education. Children can learn as much from your mistakes as your successes. Did you not start saving for retirement right away? Did you take on too much debt? Using an allowance tied to chores and raises for good financial behavior will help children learn to budget and appreciate the value of a dollar.
If you are considering giving your young adult a credit card, consider a prepaid card first. Let your kids in on charitable gifts, household budgets and paychecks. This will help prepare them when they own a home or have children. If you give to charity, this will help children see what you value and to look beyond themselves where money is concerned.
The most important time to be honest about money is when meeting with an investment advisor. I have found in my 27-year career that I am better able to help people when there is trust both ways. For example, if I am helping a person or family plan for retirement, but they fail to mention mounting credit card debt, I may give them the wrong advice by telling them to contribute the most they could to retirement while ignoring high interest debt. An overall financial picture is best with honesty about debt, taxes, wishes and income and the best way for the advisor to put together a perfect personalized plan for you.