4 great reasons to talk to your adult children about money

September 8, 2022

Over the course of your working life, you’ll have gained plenty of expertise on how to manage your money, whether you’re putting together a monthly budget or investing your wealth to help it grow. But while you have valuable experience in these matters, your loved ones may not.

In many families, talking about money can still be taboo but breaking down this barrier can be hugely beneficial. If you want to ensure that your children are able to manage their money effectively, having a solid foundation of good financial sense can be invaluable.

That’s why it can often be useful to sit down with your adult children and talk to them about finances, so they can benefit from your experience. Read on to find out four positive reasons why this can help them.

1. As the cost of living rises, young people need to know how to budget

As we discussed in a previous article, the cost of living has risen sharply in the past few months, due to disruptions in the global economy. According to data published in the Straits Times, headline inflation in Singapore is predicted to reach 5.7% by the end of 2022.

This issue can pose a real problem for young people, as they haven’t had as much time to build their wealth and so have less financial resilience. Because of this, they can easily fall into debt if they aren’t careful with their spending habits.

If you have loved ones who are having to tighten their belts, it can be useful to sit down with them and have an open conversation about budgeting. By doing so, you can help them to avoid having to rely on expensive credit, which could lead to a debt spiral in a worst-case scenario.

There are a variety of different strategies they could use, such as zero-balance budgeting or the 50:30:20 rule. Of course, some methods won’t be right for everyone so it’s important to see what might be useful for them.

By having this conversation, you can rest easy knowing that your loved ones won’t have to worry about falling into debt.

2. You can help your children to avoid falling victim to scams

In the past few years, there has been a surge of young people getting involved with the stock market. According to a report published in the Straits Times, four-fifths of people aged 18–35 hold at least one investment.

If you have children who are budding investors, while you might be proud of them for taking an interest in their financial future, you may also want to ensure they’re making informed decisions.

Since they may not have much experience of the stock market, your loved ones could have unrealistic expectations about the size of the returns they could earn. This could make them vulnerable to financial scams, as many fraudsters lure victims in with schemes that promise high levels of growth.

Educating your loved ones about investing can help them to steer clear of any scams by giving them a better idea of what to expect.

3. Your children may not know about the benefits of financial protection

Another great reason why you should speak to your loved ones about money is that they may not know how protection can help them to reach their goals.

As we discussed in a previous article, having cover in place can be hugely beneficial if you run into unexpected obstacles on the path through life.

For example, if you fall ill and are unable to work, you may struggle to pay your monthly outgoings, such as bills or mortgage payments. This is where cover such as income protection could really help, as it can enable you keep your head above water while you recover.

To ensure that your loved ones don’t have to struggle when they experience an unexpected disruption, you may want to sit down with them and discuss the benefits of protection. You could even talk about which types of cover they may benefit from the most, to give them a nudge in the right direction.

4. If your loved ones pause their pension contributions, it could leave them with a shortfall

Retirement can seem like a long way away when you’re young, which is why your children may not fully understand the importance of paying into their pension.

If they’re worried about the rising cost of living, they may be tempted to pause their contributions, so they have a bit more cash to spend. But while this can make their budgeting easier in the here and now, it could cost them a considerable amount of money in the long term.

As you’ll know, even small pension contributions can add up to a large amount over time due to the effect of compound growth. That’s why it’s important for young people to keep paying in regularly, since they have a longer time frame for their investments to increase in value.

Talking to your loved ones about the importance of making regular contributions can help to ensure that they have enough wealth to enjoy a comfortable lifestyle when they retire.

Get in touch

If you want to brush up on your own financial knowledge while you’re teaching your children, or you’d like to include your adult children in your financial planning meetings, we can help.

Either contact your financial planner directly, email us at hello@ascentawealth.com or fill in our online contact form to organise a meeting and we’ll get in touch.