Financial Fumbles for Your Kids

Worried coupleThis morning’s paper featured an interesting article from the New York Times about marriage and finances. I have touched on this topic before in “Setting Expectations,” but it is worth re-visiting.

The article said. “…most couples do not want to talk about money before they marry.” It went on to explain why that is such a terrible decision.

I have to agree, and will add that if you do not talk about money with your children and make it clear that it is a highly discussion-worthy topic, you will do them a lifetime disservice.

My husband and I were a bit atypical for our time when we married, but very lucky that we both tend toward transparency and full disclosure. He was 28 and I was 27 when we met, and we had the advantage of education, careers and some investment experience under our belts when we decided to make a life-long partnership.

One unusual thing we did was to write out our expectations.

We had a list of topics that ranged from fidelity and family to finances and future dreams. We wrote them out separately, and then compared to see where the similarities and differences appeared. It was an amazing experience and I highly recommend it to any couples who are contemplating engagement, marriage, or even living together. You may find your values align well, and your chances of success are high…or you may discover a fundamental difference in the way you view life and the way you want to live. It is better to discover that ahead of time, when you can discuss and compromise or find that you cannot compromise and this is not the match for you. And of course, it is far, far better to make these discoveries before you bring children into the relationship. Any divorced parent will tell you that.

So, what are the things you should teach your children to discuss with their potential partners when it comes to finances?  

It boils down to their risk profile.  

Questions can be:

Are you a person who feels comfortable investing in something that has a higher risk, and a possible higher rate of return, or does the idea of losing money in an investment frighten or discomfort you?

What do you think is a “good investment?”

How much money could you lose in a year and not be fundamentally upset about it?

How do you feel about investing in real estate? Is your own home something that you desire, and do you view it as an investment or a place to live?

Do the two of you agree about non-essential spending? If you make very unequal amounts of money (stay at home Mom or Dad alert!), how would you handle that inequality?

Do you have assets that you bring into the potential partnership that are yours through inheritance and have certain protections (trusts, etc.) and if so, are you comfortable talking with your potential partner about a prenuptial agreement that would reserve those assets for your heirs?

What about philanthropy?  Is that something you want to include in your family budget from the beginning, or do you view it as something that you do later in life?

What do you feel is a good credit score and do you know how to improve yours?

What kind of debt are both of you carrying, and what is your strategy to pay it off?

But wait, you say, “This is not romantic at all!” The article would agree with you, and notes that, “Money is the No. 1 reason couples fight, and a main reason marriages split up…There’s this sheepishness about bringing up the money issue.”

Bottom line, if you want your children to be one of those “forever couples,” you have to teach them to do the hard work early. It is much like parenting, where if you put the effort in up front, with communication, boundaries and love, you reap huge benefits over time. And, in the case of marriage, your children may avoid a painful, messy and financially devastating experience just by having this conversation.

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