In our last Women’s Initiative article, Three Ways to Make Money Talk a Little Less Challenging, Resource Consulting Group (RCG) Wealth Advisor Linda Palonen discussed navigating challenging discussions around finances. In this next article, she dives deeper into those conversations by looking at four complex topics we often encounter with our partners, friends, or family members.

1. Loaning or gifting money to family or friends

Most of us have been asked to lend money to a friend or family member. You may have heard that “friends are forever until you lend them money.” These conversations are common and can be uncomfortable. Whether you say yes or no, try to prepare yourself for the emotional toll it may take on you. Practice these situations or run through them in your head so that you are not surprised when someone approaches you about the possibility of borrowing money. It is good to have a policy that you can stick to when you encounter these conversations, such as not to lend money outside of immediate family, above a certain amount, or outside of gifts or birthdays. It helps to be direct with your answer so there isn’t a miscommunication that could lead the person requesting a loan to misunderstand your ultimate intentions. You don’t need to explain your answer. If you feel ready to loan money, don’t hesitate to ask what they plan to use the money for. Draft and sign a loan agreement that specifies the terms of the loan and sets up reasonable expectations for repayment. An agreement helps both parties stay on track and makes it more formal.

2. How to talk about prenuptial and postnuptial agreements

Many couples may feel uncomfortable exploring prenuptial and postnuptial agreements because they think their partner will react negatively, or they think it may give the impression that they view their partner as untrustworthy. How you frame the conversation and how you normalize these discussions matter. For example, treat the agreement as an insurance policy for the unexpected, just like you plan for a death or a disability. Ease into the conversation and frame the discussions around the other partner and how they will benefit from having a prenup or postnup. Having multiple small discussions over several months is more manageable than one lengthy conversation. Find time for each partner to be fully present and emphasize that having significant and sometimes uncomfortable conversations brings couples closer. Financial transparency is just as important to the relationship as any other type of transparency. It is better to have this discussion and tackle the anxiety over it rather than carrying it with you throughout the relationship.

3. How to keep from enabling your children

There is no question that parents always want the best for their children. But when does the good intention of helping go too far? There is a difference between giving and enabling. If you decide to give your child money, make it clear that it is a gift, and you don’t expect repayment. However, if you lend your child money, set clear expectations for repayment, and follow through. Even if you start with small loan amounts, this will teach them financial responsibility. Sometimes giving a child money advances the child’s financial well-being rather than creating more harmful spending or lifestyle habits. Behind both behaviors, asking and enabling, are likely many underlying unconscious emotional needs that both the parent and the child are trying to fill. Going back and unlocking those historical and emotional money scripts can help you and your child make a change for the better.

4. How to talk to your parents about their finances

There is a good chance many of us will have to get involved with our parents’ finances as they get older. Ideally, you want to talk with them while they are still in good health. Your parents likely have already been in your shoes and have been waiting to have the conversation with you, so this conversation may not be as hard as you think. When the time comes, start by asking about their long-term plans. How do they want to be cared for, and where? Have they already made any arrangements that you should know about? Is there anything that you can do to assist with those arrangements? Do they have any estate documents in place? Most of the time, the big picture conversations lead to more focused discussions around money and income. Be mindful of the money scripts and money biases as you go through these conversations. And, if you find yourself overwhelmed, then chances are your parents are too. Don’t be afraid to refer them to your trusted advisors for assistance in any matters that create confusion and stress.

Remember, setting boundaries for your finances and personal and emotional life is essential. While these conversations can feel heavy, having a plan and rehearsing it will help give you the confidence to set healthy boundaries and help preserve the relationship. If you need guidance navigating these difficult conversations, contact your RCG advisor. We’re here to help.

RCG Women's Initiative Mission: We launched the RCG Women’s Initiative to provide unique opportunities for our female employees to host events that will educate, entertain and facilitate networking with our female clients. Our hope is that by hosting events that address our female clients’ specific interests, we’ll empower them to find their financial voices. Due to the impact of COVID-19, we’ve moved to email communications in place of events.

This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale.