10 Things Your Parents Won't Tell You

Smart Money lists 10 things your parents won't tell you. Here are the ones that intrigued me the most:

1) "We're rich."

Surprise inheritances aren't uncommon. In a recent U.S. Trust study, 52% of parents with assets of $3 million or more said they haven't told their children just how wealthy they are, and another 15% haven't even said told them that they're well off. Why are they withholding? Most parents think they have plenty of time to talk about money later, and don't want the knowledge of wealth to be a burden, says Joseph Falanga, the president of the National Association of Estate Planners & Councils. There's also the fear that kids might become lazy or make bad choices in anticipation of a windfall.

Yes, there are many surprises, I'm sure, when kids find out what their parents are worth. And I'm sure it's on both sides of the equation -- some kids are surprised that their parents have so much and some are surprised that their parents have so little.

The point above made me think about the kids of the millionaires next door. Because the families live so frugally, I'd bet that most kids will be completely shocked when they find out how much their parents are worth.

Key questions for the parents will be how much to leave to the kids (versus giving it away, for example) and when to give it to them. Our current will has the money split between the kids and charities. The kids will get their portions over a decade or so with the last payout being when they are 30.

4) "It's my fault you're bad with money."

Parents often do a poor job teaching their kids about finance, say advisers. "If I could wave a magic wand and have one wish, it'd be that parents and kids could sit down and have a candid conversation about money," says Ted Beck, president for the National Endowment for Financial Education. Kids pick up on parents' financial actions, but it's not always clear to them what they should be emulating or avoiding. That has long-term financial consequences. The 2011 National Foundation for Credit Counseling financial literacy survey found that 42% of Americans picked up their money habits from their parents. Yet 56% of those adults do not have a budget, 28% don't pay their bills on time, 32% don't save for retirement and 33% don't save at all. Scarier: more than half would still give themselves an "A" or "B" grade in financial literacy.

Ahhhh, the reason most Americans are in such financial hot water -- they learned how to manage their finances from their parents. But the parents knew next to nothing about handling money and wanted to buy everything their greedy eyes found "fun." Hence they spent like drunken sailors to have the latest "everything" and are up in debt to their eyeballs. The kids see how it is done and repeat the cycle. Is it any wonder why the average American has such a poor financial standing?

Ok, so maybe I'm exaggerating a bit. But it's not far from the truth. Parents who know little about managing money (which is most people in the U.S.) do pass along that lack of knowledge to their kids through their examples. The kids see poor financial habits, think they are "normal" and "good", and practice them themselves. It's a sad state of affairs.

5) "You're ruining my retirement..." and 6) "...just like I'm going to ruin yours."

I had to laugh on the combination of these two. Which is worse, kids sucking money from parents for college and post-school support or parents sucking money from kids for retirement and long-term care? Ugh! It's a mess no matter how you look at it.

So what's the solution? Save for your own retirement and long-term care needs. Help your kids as you can/want with college and later in life. Keep overall spending low and save as much as you can and you should be fine.

Comments

[Rick Francis]

I think it's always better to know how things really stand. I wish my parents would let me know because I worry that they might not have enough. I've talked with my 8 year old son about our finances and mentioned how much we have saved for things like retirement and for his college. I also try to give him a sense of what the numbers really mean- and how much money we will need to have before I could retire.

>4) "It's my fault you're bad with money."

It would be if I didn't teach my children what I've learned. There are more than enough good books, blogs, and podcasts that if you want to know how to manage money well the information is available. You just have to want to know. If you aren't willing to be open about your finances you miss the best way to teach your children about their finances.

>5) "You're ruining my retirement..." and 6) "...just like I'm going to ruin yours."

I don't intend to have either happen. This is yet another good reason to talk about my retirement with my son is so that he can understand why I couldn't save several hundred thousand for his college fund, that he will need to contribute via work or scholarships, and he will need to watch how much his tuition will cost him.

-Rick

[Old Limey]

I am 76, retired in 1992 and feel very fortunate that our three children are each doing very well financially and don't need any help from us.

Our son, the youngest, never went to college, is happily married, has an 11 year old daughter, and was salesman of the year for his company in 2010.

The middle child, a daughter, has a BS in marketing but worked very briefly because her husband was a very successful attorney and didn't want her to work. The marriage lasted 18 years and ended when her 8 year old daughter, who was the only thing holding the marriage together for her, died from a brain tumor. Currently she is living on a very significant amount of alimony and when that ends in 5 1/2 years the interest on her substantial muni bond portfolio, that I manage for her, will provide a very high income for the remainder of her life.

The oldest child, a daughter, has an AA degree and is in her 3rd. marriage. At the age of 52 she and her husband adopted two baby girls and a few months ago decided to move to Maui to live because this last Winter at Lake Tahoe really got to them. She has a telecommuting job with her sister's ex husband because she used to be his office manager. It provides healthcare and a modest salary. The husband is a builder but these are hard times for builders and he is only doing part time work but they accumulated quite a bit of money from previous homes that he built.

All three children know that we are wealthy but we have not discussed inheritances with them. I have told them about our favorite charities and don't want them to think that they will necessarily receive very much. Sometimes we think that maybe it's better to skip the children in favor of the grandchildren, particularly in the case of IRAs. We have a will and living trust but it is definitely subject to change as the years go by.

[Zach]

FMF, how frequently do you plan to update your will? I assume you hope to live long enough that your kids will all be 30 before you actually die.

[FMF]

Zach --

Every three to five years or when something significant changes. I talked to my lawyer and she said this was a suitable plan.

[Eddie]

There are a few dozen counterpoint articles about the problems of assuming you will inherit more money than you actually will.If you're not going to have an in-depth talk with them about it(and G'd knows I never did), better to make your financial plans as if Mom and Dad are leaving it all to a homeless puppy shelter.

[KaseyD]

Sorry, FMF, I can't laugh about #5/#6...

I took nothing from my parents after I was 18 as I moved away. But now I'm really, really worried about #6. My 90+ yo mother has zero money other than a modest SS income and has early-stage dementia. (No real fault of her own, just modest assets and lived too long.)

I'm still pondering the question: At what stage do I stop supporting her care ($25k/year and rising) in order to protect the rest for my own retirement? My next stop is an elder care attorney to help sort this out.

I guess my take on the whole issue is that even the best laid out retirement plan (and mine WAS pretty darn good), can go off track pretty easy due to illness and longevity of aging parents (or spouse or yourself!)

[Matt]

A appropriate one would be
" I had alot of money but I sure had fun spending it all thinking I would die alot sooner and now that I just have my pension I sure have to live now pension check to pension check"