Financial planning starts at family meetings

NEW YORK -- Money is a part of everyday life, but very few people -- especially parents -- are comfortable talking about it.

Heidi Steiger, executive vice president of the wealth management firm Neuberger Berman, says avoiding financial discussions now will cause further headaches later.

Steiger edited the new book "Wealthy & Wise: Secrets About Money" (John Wiley & Sons). Much of the advice in the book, pooled from 22 financial professionals, focuses on money's place in a family and how it affects relationships.

Throughout her career, Steiger says she has seen many three-generation rags-to-riches stories. The grandparents believe that money will bring them happiness, she says, while the parents try to balance newfound wealth with traditional values, and the children often grow up to be irresponsible and helpless.

"Some people say, 'If I could only be so lucky to have this problem,' but I've seen money become corrosive," Steiger says.

Children are never too young to begin learning about money and family finances, says Steiger, although parents need to adjust the tone and direction of conversations depending on their children's ages.

Children also should be taught about how money can contribute to but not control a "rich life."

"A 5-year-old might ask 'Are we rich?' out of fear that someday her life as she knows it might end," Steiger explains.

Her suggestion for a response: A parent could explain that one or both of the adults in the family earn money at work and that's what gives them the means to put food on the table and buy clothes.

As for the "rich" part, Steiger says it's important to instill in children that a rich life comes from a loving family and a giving spirit.

Steiger suggests holding regular family meetings to tackle all these issues. The targeted discussions provide a platform for all family members to weigh in on financial matters and to gain a better understanding of each other's perceptions, she explains.

"Parents will still make the decisions but getting input from the kids is important. ... The meetings also can be a lesson in democracy if three out of four want to do something and the other doesn't, but everyone should be heard -- and get their way -- sometimes to encourage the dialogue," Steiger says.

These meetings can empower children and fuel their interest in financial planning if their own still-developing voice has a say in how the family earns, spends and saves money, she adds.

But try to tell a teenager that attendance is mandatory at a money meeting and you're sure to get more grunts than a gung-ho "Let's do it."

And these meetings shouldn't necessarily end once the kids become grown-ups and move out of the house -- they are still children, albeit adult ones, and they have an interest in family finances, Steiger notes.

One topic that is likely to come up periodically is the different payouts children receive.

Children tend to keep track of what is being spent on both themselves and their siblings, especially as they get older and develop different values and life goals, Steiger observes.

Unfortunately, says Steiger, there is no magic formula that solves these squabbles, but at least if the family talks about it there won't be any surprises. "You learn by trial and error."