3 important money conversations to have with your family now

In the UK, money remains a taboo topic in many households. According to data published by Standard Life, 42% of UK adults don’t feel comfortable talking to friends and family about money.

Research by Loqbox has revealed that this could be due to several reasons, including:

• A fear of being judged
• Wanting to avoid feeling awkward or offending others
• Believing that discussing financial matters is impolite.

Yet, talking through key financial issues with your loved ones might help alleviate feelings of stress, manage expectations, reduce the risk of disagreements, and allow you to plan for the future as a family.

What’s more, the holidays – when families often get together in a relaxed environment – could be a great opportunity to broach these difficult topics.

So, read on to discover three important money conversations to have with those closest to you, perhaps even over the festive period, if you want to take control of your financial future.

1. Discuss your family’s protection needs to ensure you’re prepared for the unexpected

You may not like to think of a time when you or a family member might become ill or injured.

If you’re young and in good health, it could be tempting to think, “It won’t happen to me”. Yet, unfortunately, no one can predict what’s around the corner.

Indeed, figures published by FTAdviser reveal that 56% of UK adults have been injured by an “everyday misfortune” such as tripping or falling over. What’s more, 52% said they would need financial support if they had to take time out of work due to illness or injury.

That’s why talking through your family’s protection needs and putting adequate cover in place could provide an invaluable financial safety net.

For example, income protection might cover the cost of essential outgoings, such as your mortgage and food bills, if you are unable to work for a period due to ill health or injury.

Alternatively, taking out comprehensive life insurance could ensure that your partner and children are provided for if you pass away.

However, according to the FTAdviser research, 35% of UK financial advisers said that their clients only thought about financial protection “once it’s too late and they need to make a claim”.

So, talking to your family about your protection needs now and putting adequate cover in place could provide invaluable peace of mind that you’re prepared if the worst happens.

2. Share your long-term goals with your partner to help you plan for your dream retirement

It could take many years to accumulate the wealth you need for your desired retirement, so the sooner you start planning, the better.

Considering your long-term goals and sharing these with your partner could help you work together to achieve them.

What’s more, planning your retirement finances as a couple could allow you to make the most of tax-efficient savings and investments.

For example, imagine that you are a basic-rate taxpayer receiving 20% pension relief on your pension contributions, and your partner is a higher-rate taxpayer claiming an additional 20% relief (a total of 40%) on their contributions.

You could maximise the tax relief you claim as a couple by prioritising contributions to your partner’s pension. If your partner is an additional-rate taxpayer, this might be an even more attractive option as they could claim an additional 25% relief (45% in total).

Yet, despite the potential advantages of retirement planning as a couple, PensionsAge has reported that half of those aged 55 and over have not discussed their desired retirement lifestyle with a partner or loved one.

If you’ve yet to talk to your partner about your retirement goals, now might be a good time to start the conversation.

3. Manage your children’s expectations by being open about your estate plan

You might feel uncomfortable talking to your children about how you’d like to pass your wealth on, but failing to do so could lead to disappointment and distress.

In fact, research published by MoneyAge in 2019 found that on average, UK adults significantly overestimate the amount of inheritance they’ll receive.

On the other hand, by discussing your estate plan with your children you could manage their expectations and help them set realistic financial goals for their future.

What’s more, talking about your loved ones’ inheritance could help you understand their financial situations and long-term goals.

Indeed, figures published by Canada Life have revealed that 1 in 5 adults in Britain are delaying major life plans, such as buying their first property, until they receive an inheritance.

So, openly discussing your estate plan might lead you to revise your plans so that you can provide financial support to your children when they need it most.

For example, you may decide to gift some of your children’s inheritance to them in your lifetime. Not only could this allow you to take advantage of certain Inheritance Tax gifting exemptions and allowances, but it could also give you the joy of seeing your loved ones benefit from your wealth.

Get in touch

If you’re unsure how to talk to your family about your finances, we can help.

Our experienced financial planners can help you review your finances and prepare for difficult money conversations with your loved ones. We can also work with you as a family to talk through the financial matters that are most important to you.

So, if you’re looking for a financial planner in Bristol, please get in touch either by email at helpme@aspirellp.co.uk or by calling 0117 930 3510.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.