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Mom As Financial Advisor: Financial Advisors' Daily Digest

by: SA For FAs

A mother wonders how she can help her adult children learn how to responsibly manage their personal finances.

Mark Armbruster, CFA: Flipping a coin beats forecasts from the most famous market experts.

Charlie Bilello: The stock market does not mirror the economy.

What can we do to teach our children about financial responsibility – when they’re already grown up?

That is the very poignant question asked by ejane11 in a comment on yesterday’s article describing the reality that large numbers of Americans are potentially one emergency away from a financial disaster. Here is an excerpt from her comment:

Being 69, husband 85, married to my husband for 46 years, we raised two wonderful, smart children. But they are not financially smart.
They never went without. They went to the best schools. They never had student loans. However, they knew I always saved. I handled the finances, ran my husband’s business. I'm not sure what I did wrong. They are both adults but seem incapable of managing money. My daughter married a wealthy man who manages everything. My son never married and can barely get by working two jobs. I know our son is one minute away from the story you describe. We have always bailed him out with sudden emergencies because what else could we do? Nothing? Tried that and it made things worse. Both are in their 40's. They are not children. Our daughter doesn't worry me as her husband is very careful about money. But, we wish she were. Things can change. Our son, I fear will not learn anything until we are gone.”

Even though we all understand – ejane11 included, as is implicit in her note – that teaching our “kids” is no simple task when they’re adults, I could not ignore the challenge of her question, because it is so utterly important for the simple reason that, at whatever age, our kids remain our kids. What follows therefore is my attempt to offer ideas with the recognition that there are no slam dunks when we’re talking about influencing fully grown adults.

First, don’t beat yourself up over this. You did the best you could in raising them; it is a happy fact that “they never went without,” that you provided them with the resources you had.

Second, among the most important statements you made is the truth that “things can change.” The fact that they knew their mother always saved surely made an impression on them, even if they don’t live like that themselves. Should the need arise, they can more easily access that lesson from their youth. It will always be a part of them.

Third, we can never ever give up on our children. You know where your children are at in terms of their personal financial management and you know where they ought to be. Chart a path for them (for you privately – at least at first) and figure out what the first step on the path would be. It could be sharing your own reminiscences of the difficulties you had growing up in less flush circumstances – the financial trade-offs their grandparents had to make, etc.

Another step might be getting them to think more concretely about managing their finances. This could take the form of getting them a book, or invoking the help of a financial advisor.

As to the book, I couldn’t make a confident recommendation without knowledge of your children. It is possible and even likely that an outright financial book would be very off-putting to them. You could take a step back and try something like “The Autobiography of Benjamin Franklin,” which is infused with ideas about self-discipline. You could take a further step back and get your son “The Little Prince,” which is really an adult book disguised as children’s literature.

It encourages its readers to rediscover the child in them. The author, Antoine de Saint-Exupery, writes in his dedication: “All grown-ups were once children - although few of them remember it.” There’s nothing explicitly financial in it, but it’s not a bad conversation starter for someone who might be seeking a mid-course correction.

As to an advisor, in your children’s case, I wouldn’t recommend a conventional advisor that creates a financial plan, personalizes an asset allocation and makes investment recommendations. I would look for a consultant that works with private individuals as a sort of financial coach at the level of the client’s monthly budget (or lack thereof). Such a person should ideally be local, so he or she could visit the client(s) in their home and view their lifestyle, note their income, examine their spending and credit-card habits and work with them to get in financial shape.

In less than two weeks, your son may come to you with a bouquet of flowers for Mother’s Day. Surprise him (and your daughter as well) with a present of your own. After all, it’s your day, and your kids and you can do as you please. No less than someone who starts and successfully continues a diet, real change and real happiness with the results are within their grasp, and your facilitating that will cost far less than your emergency loans.

Finally, know that you are far from alone regarding this issue. Coincidentally, I saw a new survey out today (from mobile banking company Varo Money) that finds Americans – including GenXers like your kids – not uncommonly turn to their mothers for financial advice (23%), and more often than to a professional advisor (13%). You can provide your children with the appropriate moral support as long as the need exists. After all, what are mothers for?

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