Balancing the needs of young adult children with aging grandparents can be difficult. It calls for an advisor to understand family dynamics and goals. Advisors may want to incorporate tools from coaching to help balance these needs, including working with family members to assess and individualize financial education plans.
The last few years have been predictable only in their unprecedentedness. Whether the feelings of instability flow from market volatility or middle east conflict, uncertainty is a stumbling block for many investors. And that uncertainty isn’t likely to be resolved, at least for the near future. Financial advisors can help clients work through some aspects of uncertainty by broadening the lens of their advising to help clients plan for the future. And by future we mean, the entire family. Here’s what to know about creating family financial plans.
Income variability is common and entrenched. New research shows that most families have variable income, and those fluctuations can cause stress for everyone. “They found that over the year, households experienced an average of 2.2 months when income spiked above the 25 percent level and 2.4 months when it dipped below. That adds up to nearly five months per year when the average household’s income was very different from its monthly standard.” [1]
The commonality of income variability has led to financial resiliency as common priority among American families. Research shows that inflation and saving for the future, along with health care costs, top the list of stresses among families. That’s true across most demographics, including gender and family status.[2]
Young Adult Children, Specifically, GenZ rely more heavily on parents than ever before.
Research from Bank of America shows that nearly half of GenZ relies on financial assistance from their parents and extended family, including paying for rent and housing. Those who do pay for their own housing report that budget item consuming more than 30% of their income. But when polled, equal amounts say they lack the finances to life the life they want. That is leading some in that generation to delay investing to address debt. But the reason for many of their struggles isn’t necessarily a rise in the cost of housing or decreased access to well-paying jobs. It’s a basic inability to budget. “The new Better Money Habits research found that “loud budgeting” – being vocal with friends about what social outings they can and cannot afford – has helped Gen Z live within their means.”[3]
Parents may assume that their young adult children’s financial struggles are due only to inflation and the wild increases in home sales related to the pandemic. A financial advisor can help parents and adult children create manageable budgets by addressing these needs jointly. Some experts have even noted that discussing career plans with young adult children can help parents have a better sense of when their financial assistance should wax and wane.
Part of financial planning for young adult children, so that they might not rely as deeply on their soon to retire parents, may include financial planning around kids having kids. That can include discussing when (and how) to open tax advantaged savings accounts such as HSAs and 529 accounts, as well as potentially saving for the costs of IVF or adoption.
Succession planning for family owned or operated businesses is an evergreen process. Succession planning is a difficult discussion among families in family owned companies. There are even TV series covering the drama involved with it. One key topic some experts suggest is to determine how to mix business planning, concerning future growth, with succession planning, concerning future management. By including succession planning alongside business planning, potential succession plans can take shape organically. And there may be less options for Emmy awards for the drama. Just as a good business plan should be reviewed and revised regularly so too should a succession plan. By creating parallel tracked processes of revising succession plans alongside business plans, it can be easier for families to discuss succession rather than only turning to it in emergencies.
Grandparents and elder clients have specific elder abuse and exploitation needs that the entire family should know of a monitor. Elder abuse, especially financial elder abuse, continues to be a significant concern in America. A family financial plan that includes multiple generations can be part of a plan to monitor this concern.
By including red flag warnings for elder abuse in a family financial plan, financial advisors can help families normalize conversations about elder financial abuse. The stigma around abuse contributes to the severity of it, not just its frequency. Some experts suggest that some of the benchmarks in a family financial plan may coincide with so-called “windows of opportunity” for elder financial abuse. Those opportunities include downsizing a home as well as the lost of a spouse, as well as the need for a caregiver as health declines.[4]
These competing needs can be balanced by taking a coach approach. Balancing the needs of young adult children with aging grandparents can be difficult. It calls for an advisor to understand family dynamics and goals. Advisors may want to incorporate tools from coaching to help balance these needs, including working with family members to assess and individualize financial education plans and assisting family members with identifying financial goals and values.
Some specific action items advisors working on family financial plans may want to consider include:
1. Make sure everyone who is needed is included in the conversation. This may be more challenging than as different generations have different expectations around the method of communication, with older generations preferring face to face discussions and younger ones looking to video/Zoom options.
2. Multiple communication methods can be especially helpful when creating multi-generational education webinars. Advisors may want to consider having hybrid options for families to be as inclusive as possible.
3. Advisors will also need to make sure that the financial reviews they perform for their client families are as up to date as can be. This may mean reviewing and recalibrating often.
[1] https://ssir.org/books/reviews/entry/the_closer_you_look_the_worse_it_seems
[2] https://www.newyorklife.com/newsroom/2023/wealth-watch-financial-differences-in-families
[4] https://extension.umn.edu/later-life-decision-making/preventing-elder-family-financial-exploitation
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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