One of the most important talks parents must have with their children is about money to help prepare them for their financial future. Estate planning should be an essential part of that discussion, so your children know how to protect their finances and choices when they become adults. So, which money topics should parents discuss with their children? Let’s explore.
The Top Money Topics
Explaining money to children is a complex but important task. It’s never too early to start having money conversations with them, as financial education can help them make informed decisions when they grow up. Here are some of the top money topics that parents should discuss with their children:
- Saving Money – Explain the importance to your children of saving money for the future. Open a savings account for them and encourage them to deposit a portion of their allowance or money they earned.
- Investing – It’s imperative they understand the power of investing early in life. Discuss such investments as stocks, certificates of deposit, money market accounts, and encourage them to set up a retirement account like an IRA or contribute to a 401 k to ensure their financial stability in their later years.
- Estate planning – A Last Will and Testament, Power of Attorney, and Health Care Proxy, are among the critical estate planning documents your children should have in their adult years to protect their assets, decisions, and their family.
- Smart spending habits – Teach the basics of budgeting so your children will know how to manage money and prioritize their spending.
- Needs and Wants – Discuss the difference between needs (food, housing, clothing) and wants (eating out, lavish jewelry, etc.). This will help your children understand the benefits of sensible money management.
- Credit cards – Explain the dangers associated with irresponsible credit card use so they can avoid getting into debt when they become adults.
- Earning money – Discuss how making the right career choices and working hard can reap rewards in the future.
- Financial independence – Your children need to understand how wise spending and investing can help them strive for financial security in life.
Discussing these money topics with your children now will provide them with the knowledge and skills to make smart money decisions in the future. It is never too early to begin having money conversations.
Related Article: Estate Planning: Your Guide to Get Started, Conversations to Have, and More
Discussing Estate Planning with Your Children
A critical money topic parents should discuss with their children that is often overlooked is estate planning.
No one knows what the future holds for each of us. There is that old saying that the only sure things in life are death and taxes. Also, illness and accidents can happen at any time at any age that we need to be prepared for. That is where an estate plan comes in: Legal documents that ensure your wishes and choices will be carried out when you pass, or you should become incapacitated.
These are the essential estate planning documents to discuss with your children they should have when they become adults:
- Will – Also known as a Last Will and Testament, it allows the creator of the Will, known as the testator, to list the assets they want to be distributed and to whom, known as the beneficiaries, when they pass on. Additionally, this document allows a guardian to be appointed to care for minor children should both parents die. It also allows you to nominate who you would want to manage your estate. This person is called the executor or personal representative.
- Power of Attorney – If you become incapacitated due to illness or an accident and cannot make your own decisions or manage your affairs, a Power of Attorney can do it for you. In the document, you appoint someone to act on your behalf to sign legal papers, pay bills, and manage your estate in the event you cannot.
- Health Care Proxy – If you are unable to make your health care decisions, you need someone you trust to make them for you. Ensure your health care wishes are carried out by appointing a Health Care Proxy. You can list the medical procedures and care you want or do not want that the proxy would communicate to your doctors. In some states, a document known as an Advance Directive would list your health care wishes that would work alongside the Health Care Proxy document. A gentreo Health Care Proxy is all inclusive and includes options to state your wishes in regards to life sustaining treatment.
- Trust – If you want to leave your home or money to someone, a Trust can be set up, so those assets go directly to the named beneficiaries upon your passing avoiding probate.
If you do not have these documents in place and you die or become incapacitated, the state would step in and make decisions for you. These decisions may not be what you want and likely would result in legal action that could cost hundreds, if not thousands of dollars and cause strife among your loved ones.
Related Article: What Happens if Your Loved One Dies Without a Will?
Once an estate plan is created, it needs to be in a place where it can be easily found when needed. Gentreo’s Family Digital Vault is the perfect solution where all your important documents can be securely stored, shared, and accessed 24/7 from anywhere with just a couple clicks.
Why Should I Discuss Estate Planning with My Children?
Estate planning is an important part of preparing for the future and ensuring that your estate is managed in a way that benefits both you and your children. It’s never too early to start discussing estate planning with your children, as it gives them the opportunity to understand their rights and responsibilities as heirs when it comes time to manage your estate.
From estate planning basics like Wills and Trusts to more advanced estate planning issues, there are many reasons why parents should discuss estate planning with their children. Here are four of the most important:
- Establish Your Wishes – Estate planning isn’t just about divvying up assets according to your wishes; it’s also a way for you to make sure your heirs know exactly what those wishes are. By talking estate planning with your children, you can ensure that they understand everything from who will take care of them when you’re gone to how you wish your estate to be distributed.
- Educate Your Children – Having an estate plan isn’t just about making sure that your estate is taken care of after you’re gone. It’s also about educating your children on the importance of estate planning for themselves. Estate planning can help your children understand their financial obligations and prepare them to make estate planning decisions when they reach adulthood.
- Avoid Family Conflict – No one wants estate disputes in their family, but unfortunately, these types of conflicts are all too common when there isn’t an estate plan in place. By discussing estate planning with your children, you can make sure that everyone knows what assets belong to whom and how those assets will be distributed upon death or incapacity. This kind of clarity can prevent a potential rift down the road. Also, they will understand how an estate plan can avoid issues with their loved ones when they become adults.
By involving your children in estate planning conversations, you can take the time to explain the purpose of estate planning, as well as how a will and other estate planning documents are used. This will help them better understand the estate process when it comes time for estate settlements, inheritance distributions and estate taxes.
Related Article: Why Everyone Over Age 18 Needs an Estate Plan
Estate planning is a key component of any financial security plan. This kind of early education can help give them the tools to create a secure financial future for themselves and their families.
Let Gentreo Help You Create Your Estate Plan
Gentreo makes it easy to create a custom, affordable, online estate plan. Our coaches can guide you through the process, one-on-one, and estate planning attorneys we have partnered with in every state can answer your personal state-specific questions. We also offer our Gentreo Pets, pet-specific legal documents to protect your pet in the event something happens to you.
We are the leader in the next-generation estate planning and Gentrep was one of ten companies out of 2,500 globally to participate in Morgan Stanley’s Multicultural Innovation Lab.
