While often afraid of becoming our parents, the truth is, we typically inherit our relationship with money from them – as they did from theirs. Many of us were raised to think that talking about money is taboo, but this idea perpetuates financial illiteracy, and avoiding money conversations can have a lasting negative impact on our own money attitudes, relationships and life goals. Only 24% of millennials demonstrate basic financial literacy, according to a report by the National Endowment for Financial Education (opens in new tab), which translates to three-quarters of a generation being ill-prepared for their retirement or other financial milestones. Having forthright conversations about our finances can help us learn, grow and better prepare for our future.
Money wasn’t really talked about in my own family growing up. Being raised in an Asian household, a significant emphasis was placed on education, but oddly enough, no financial education. It wasn’t until I graduated college and entered the “real world” (and had to pay my own bills) that I began to adopt my own foundational truths. Since then, I’ve shared these with countless families over the years in my work as a financial adviser.
Simply put, some long-held beliefs about money no longer hold. Many of these ideas that have been passed down through generations should be put out to pasture. Here are five outdated taboos, in particular, that need to be banished, followed by some more helpful mantras that can serve as replacement for them.
Taboo No. 1: Debt is always bad. (False!)
Many parents tell their kids that being in debt is bad and something to be avoided. But there are different kinds of debt, and not all are equal. For example, most homebuyers will need to take on a mortgage when they decide to make the big purchase, which is an example of good debt. And student loan debt isn’t necessarily bad either, since that’s considered an investment in your future!
Instead of being apprehensive about the idea of debt, it’s best to educate yourself on things like interest rates, credit scores and loan terms to make sure you can manage debt properly. In fact, if you’re disciplined enough and are one to pay off things like credit card bills in full every month, you can use some of the rewards benefits to your advantage.
Taboo No. 2: It’s never OK to cut off your kids. (Sorry, kids, but that’s false!)
I’ve seen first-hand how difficult it can be for parents to cut off their kids financially. In fact, I’ve seen clients continue to give their children a monthly allowance well into their 50s! Now, being a parent myself, I understand how hard it can be to walk the line between being supportive and helping your kids too much, which can often be to their detriment.
One of life’s critical ongoing lessons is achieving independence – including financial independence. Encouraging your children to earn their own money and support themselves is better for their confidence and growth as an individual.
Taboo No. 3: Leave your kids an inheritance, even if it means a huge sacrifice. (Definitely false!)
Many parents have the idea that they need to leave their children something when they pass. The idea of leaving a legacy in terms of financial assets or real estate is a common and long-held tradition, and rings especially true with an emotional asset such as a family home. While it’s a nice thought, remember that these assets shouldn’t be set aside at the sacrifice of your own well-being.
Most children just want their parents to live out their last years in comfort, so if you can’t afford to leave an inheritance, it’s more than fine!
Taboo No. 4: You should never keep finances separate in a marriage. (Not true!)
Many of our parents happily combined finances into joint accounts and shared everything. But that’s not the norm anymore, as couples often keep their finances separate or take a hybrid approach – a shared account plus individual accounts. According to a survey by Fidelity (opens in new tab), one in five couples identify money as their greatest relationship challenge. Communicating about finances is necessary to help strengthen relationships and ensure your major life goals are in sync, as money is often one of the leading causes of divorce (opens in new tab). Do whatever works best for you and your partner. The important thing is to discuss your financial aspirations and maintain open communication around finances.
Taboo No. 5: The same goals that were good for your parents are good for you. (Nope!)
Times have changed. It’s no longer the norm to get married in your early 20s, buy a house right away, and have kids. While that plan worked for previous generations, it may not be the smartest or best approach anymore, especially as housing prices skyrocket and our lifestyles change. Not to worry – renting may even be a better financial decision depending on your situation. It’s all right to let go of the dreams of your parents; what matters is that you have financial goals of own and a plan to achieve them.
Talking about money shouldn’t be taboo
According to Walden University graduate Audra Sherwood's research, "Differences in Financial Literacy Across Generations (opens in new tab)," approximately four in seven Americans are financially illiterate and report being unable to manage their finances. On top of that, a FINRA study (opens in new tab) found that over 53% of adults say thinking about their financial situation makes them anxious and 44% say discussing their finances is stressful. The cycle of financial illiteracy and negative emotions tied to money will continue unless we learn to break the taboo.
The bottom line: Having open conversations about money is how we learn, grow and build healthy relationships. As much as it wasn’t part of my childhood, I’m trying to consciously have those teaching moments around money with my 4-year-old. It’s fun to talk with him about how he’s going to divvy up his birthday money and what he wants to save for next. Even though he’s still young, I can already see him grasping some basic financial concepts. As for my parents, they have also become more open about money and finances over the years, and we’ve had many conversations around planning for the future. These discussions ultimately led to their retirement this year.
It’s also important to remember that as much as our upbringing influences the way we see finances and wealth, we ultimately define our own stories and can change our mindsets. Figure out what money stories you tell yourself and where those ideas came from. Did a belief come from a particular situation or memory from a family experience? Does the belief conflict with your life now?
If the money stories you tell yourself no longer work for you, then redefine your goals to align with your values and stop living by unwritten rules defined generations ago.
Halbert Hargrove Global Advisors LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice.
Julia Pham joined Halbert Hargrove (opens in new tab) as a Wealth Adviser in 2015. Her role includes encouraging HH clients to explore and fine-tune their aspirations — and working with them to create a road map to attain the goals that matter to them. Julia has worked in financial services since 2007. Julia earned a Bachelor of Arts degree cum laude in Economics and Sociology, and an MBA, both from the University of California at Irvine.
Stock Market Today: Stocks Gain Ahead of Fed Meeting
Exxon Mobil (XOM) and General Motors (GM) both popped after reporting solid earnings.
By Karee Venema • Published
The 10 Best Closed-End Funds (CEFs) to Buy Now
The best closed-end funds will significantly boost your portfolio income and allow you to buy their underlying stocks and bonds at a discount.
By Charles Lewis Sizemore, CFA • Published
Five Ways to Diversify Your Portfolio During a Recession
Investing successfully during a recession is tough. However, you can protect and grow your portfolio with various diversification strategies.
By Justin Grossbard • Published
Curious About a QLAC? SECURE 2.0 Act Gives This Annuity a Boost
New legislation raises the amount you can transfer from your rollover IRA to a qualifying longevity annuity contract (QLAC), reducing RMDs and increasing guaranteed lifetime income.
By Jerry Golden, Investment Adviser Representative • Published
Need an Estate Planning Checkup? Now Is the Perfect Time
An appointment with your estate planning attorney can address any holes that have developed and ensure everything is in place.
By Jack R. Hales Jr., J.D. • Published
How to Create Retirement Income That’s Driven by Cash Flow
Using a combination of dividends and structured notes in your retirement portfolio can offer liquidity, income and risk mitigation.
By Kyle Hammerschmidt, Investment Adviser • Published
Gaining More Certainty in Your Retirement Income Plan
Relying on market performance to close the gap in your retirement income could let you down, but a CD ladder and fixed annuities could provide some certainty.
By Cole Czajkoski, Investment Adviser Representative • Published
Considering a 1031 Exchange? The Rules You Need to Know
Taxes are an inevitable part of investing in real estate. You can, however, defer or avoid paying capital gains taxes by following some simple rules of a 1031 exchange. Yes, you read that correctly!
By Daniel Goodwin • Published
Could ChatGPT and AI Change Delivery of Legal Services?
Two attorneys weigh in on whether artificial intelligence could become a legitimate (and trustworthy) way to get legal help in the future.
By H. Dennis Beaver, Esq. • Published
Financial Wellness Is Self-Care: 3 Steps to Help Improve Yours
Many people resolve in the new year to get healthier. Taking charge of your financial wellness can help improve your physical health by lowering your anxiety about money issues.
By Kara Duckworth, CFP®, CDFA® • Published