Use the Holidays to Talk With Your Family About Personal Finance

Tough topics -- such as advance directives and saving for retirement -- are best approached face to face.

The holiday season is often the time when families gather together. Here’s a suggestion: Why not take this opportunity to engage in a meaningful conversation with your family members about how you’d like them to be as well prepared as possible for the future?

Two essential concerns that often get short shrift among families are disciplined saving for retirement and advance health care directives. The substance of what you can potentially discuss (if you haven’t already!) impacts every generation. If these concerns are tackled now, you’re likely to prevent huge misunderstandings later. Even more importantly, you’ll be helping your family to safeguard their health decisions and enjoy a more secure retirement.

“Gen Up, Gen Down”

You might think of this exchange in terms of “Gen Up, Gen Down.” From the vantage point of the older generation (Gen Down), the conversation can include advising your kids on the best strategies to save and invest for retirement, along with familiarizing them with your own carefully considered (and documented) end-of-life directives.

If you’re a younger family member (Gen Up), and are unaware of your parents’ wishes concerning advance care planning, this discussion could be about urging them to lay the foundation for end-of-life choices that are well understood—and that, as a consequence, can be honored. And, by the way, a great starting point is to talk about what you’re doing or planning to do to help make these recommendations a reality.

Saving for the Future

If you’re reading this article from the perspective of a parent with one or more children in their 20s and 30s, a critical concern should be whether they’ve started saving for their retirement.

Thanks to the phenomenon of increasing longevity, your own retirement savings will likely need to stretch across several decades. For many parents, that means less of a legacy to leave their children. For young adults at the beginning of their working lives, saving for retirement is more critical than ever. Those savings could be virtually all they can count on to support their own retirement down the road.

Specifically, here’s what you should be asking your children: Are you saving the maximum amount that you can under today’s tax laws? And placing it in an IRA so it can grow tax-free?

This is the question you might be asking yourselves: If my kids are struggling with contributing the full amount—can I afford to help support their IRA contributions?

The graphic below illustrates what a mighty difference it makes when people start early in socking away the contribution (we’ve used $2,000 of earned income, but it usually has been adjusted for inflation annually) in a Roth IRA. With a Roth IRA, that savings can be invested and grow tax-free.


As illustrated above, if begun at age 22, a $2,000 Roth IRA contribution when made at the beginning of each tax year, based on an annual growth rate of 7%, will grow, tax-free, to $566,930 when the account holder turns 65—44 years later. Postponing that process for 20 years (beginning it at age 42) means the end amount will be just $123,834. By way of contrast, that same amount, if not invested in an IRA (and exposed to a 30% tax rate and subsequent 4.9% tax growth), would amount to $307,760 after 44 years.

The difference between starting at 22 and starting at 42? Simply put: Solid retirement savings vs. nowhere near an adequate retirement nest egg.

Compound Interest: The 8th Wonder of the World

Some attribute the observation “Compound interest is the 8th Wonder of the World” to Albert Einstein. Regardless of who authored it, the point made is profound. Compounding is why there’s such an enormous disparity in the results achieved between starting to save and invest in your early 20s versus starting further on. It’s tremendously important that Gen Y starts saving and investing now. The diagram below presents the compounding argument (based on a 7% annual rate of return) in an unadorned way:


As a parent, if you have the financial means to help your kids be better positioned for their futures, I can’t think of a more effective way to accomplish this than to kick in a portion of the current maximum allowable to their IRAs each year. Starting this holiday season. But regardless of whether or not you can afford to help out financially, persuading them of the value of this discipline is a huge gift in itself.

Advance Directives

Conversations about end-of-life choices are often characterized as “uncomfortable” or “difficult.” Every family is different; in my experience, these discussions give people who care about one another the opportunity to discuss what truly matters to them—along with the potential to make future outcomes significantly better.

Advance Directives legally document your wishes and values should you become too incapacitated to make health care decisions. A great starting point for the Advance Directives conversation is to talk about what you’ve already done to make your wishes clear. Whether you’re a parent having this conversation with your children, or an adult child raising this subject with older parents: Have you formalized your own Advance Directive? Unfortunately, medical crises happen to people of every age.

Every adult should take the time to prepare an Advance Directive. By doing so, you’re directing your own destiny—while helping to protect family members from carrying the burden of making critical medical decisions for you. It’s a “gift” to yourself and to your family that’s well worth sharing during the holidays, or any time of the year.

Russ Hill CFP®, AIFA® is CEO and Chairman of Halbert Hargrove, based in Long Beach, CA. Russ specializes in investing, financial planning and longevity-awareness solutions.

About the Author

Russ Hill CFP®, AIFA®

CEO and Chairman, Halbert Hargrove Global Advisors LLC

Russ Hill CFP®, AIFA® is CEO and Chairman of Halbert Hargrove Global Advisors LLC, an independent registered advisory firm based in Long Beach, CA. He has led the firm for more than 40 years, specializing in investing, financial planning and longevity-awareness solutions. Russ is heavily involved with Stanford University's Center on Longevity, and has helped to launch the Center's symposiums and Design Challenges on aging-related challenges.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
11 Best Monthly Dividend Stocks and Funds to Buy
Kiplinger's Investing Outlook

11 Best Monthly Dividend Stocks and Funds to Buy

Your bills come monthly. Why not your dividend checks? These are some of 2021's best monthly dividend stocks and funds for easier income planning.
June 16, 2021
You Can Appeal a Medicare Premium Surcharge

You Can Appeal a Medicare Premium Surcharge

If you meet one of the seven qualifying life events, you have a good chance of getting a higher premium for Medicare Part B and Part D reduced.
June 16, 2021


Super Deals and Discounts for 2021
Smart Buying

Super Deals and Discounts for 2021

Consumer prices are popping as the economy reopens, and that means finding good values is more important than ever. We uncovered bargains on everythin…
May 25, 2021
What Kids Need to Know About Finances
Women & Money

What Kids Need to Know About Finances

In a digital world, it's even more critical to teach children how to handle cold, hard cash.
May 24, 2021
10 Ways to Talk to Your Aging Parents About Their Finances

10 Ways to Talk to Your Aging Parents About Their Finances

There's a good chance that many adult children will have to get involved with their parents' financial lives as they age.
May 21, 2021
10 Best Financial Benefits for Military Families

10 Best Financial Benefits for Military Families

Service members face a range of threats – from the lethal to the financial. A wide array of generous benefits and programs are meant to offset some of…
May 19, 2021