Money remains a taboo subject, even among family members. Growing up, I always knew how much money my parents made. It wasn’t because my parents were teaching us kids lessons on personal finance, it was just not something that was hidden. As I became older, and more interested in personal finance, I realized that this was not common.
For the most part, once kids are in high school and college they have an idea of how well-off their parents are, even if they don’t know the specifics. Teenagers realize that some kids don’t have to get a job once they turn 16 to be able to afford gas money, or there are kids who don’t have to take student loans for college or get a job for beer money.
Boomers are ill-prepared for retirement. The median household retirement savings for 55 to 64 years old is $120,000. Unless someone has a fat pension, or some other passive income, that isn’t going to get a household very far in retirement.
Now I know most 20-somethings are probably thinking “what do you expect me to do? I have student loans and eventually want to buy a house.” Some parents are so ill-prepared for retirement that they will have to ask their kids for assistance, whether that is moving in with them to lower their living expenses or by asking for for financial support.
Parents counting on their kids for assistance in retirement is bad for two reasons: 1) kids might not be in a financial situation where they can help (or want to), and 2) asking for financial assistance after working and supporting a household for 40+ years is a hard pill to swallow.
One way to ensure that parents will not require assistance from their children is to have open and honest conversations about finances between parents and kids. The earlier the better. This may be hard for families where money was never discussed. It may be hard for the kids to bring up as well. Perhaps they have always looked up to their parents for advice and reversing roles might seem out of place.
A good way to broach the subject is to bring up financial topics when they are relevant to the children. Start a new job with a 401k? Tell your parents you signed up to contribute at least enough to receive the full match and ask your parents how much they contribute to their 401k. Get married and are having your estate plan figured out? Ask your parents if they have an estate plan in place. Did your Aunt recently retire to volunteer and travel? Ask your parents what their plans for retirement are, and if you’re brave – how they will pay for it.
The earlier, the better to have these conversations. It’s much easier to right someone’s financial ship when they are 55 compared to when they are 65, since they still have many years left in their career and they are most likely in the higher earning years.
Even if you don’t feel comfortable talking about money with your folks, it is better to get a read on their plans and financial standing before they ask to move in with you, your spouse, kids, Spot the dog, and cat named Fortnite.