Chances are, you think differently about money than your parents and grandparents — and it’s not just an age thing.
The turbulent economy of recent years, the social media revolution and other unique generational experiences have all contributed to how 20- and 30-somethings today approach spending, saving, charitable giving and careers. These generational divides can cause conflicts within families if not addressed before adult children take a more hands-on role managing their families’ wealth. But before you discuss financial issues with older family members, it’s worth understanding your own views.
Here are four key questions to ask yourself:
1. How Do I Spend and Save?
Spending habits frequently create rifts between family members. Some may feel they deserve to spend money they earn in order to enhance their lifestyle. Others may feel frugality is essential to ensuring the family’s long-term financial security.
Consider how important saving and spending are to you. Do you automatically save money when you get it, or do you tend to spend it? Do your current spending habits reflect your beliefs about spending? Also, consider whether you believe money should be spent by the person who earned it or whether there’s a responsibility to save some for future generations.
Understanding your spending habits can help you better understand your own values and, if you feel like you aren’t saving enough, to make positive changes.
2. How Does My Career Path Align with My Lifestyle Expectations?
Your career path can significantly affect your financial situation and lifestyle. Many people in their 20s and 30s today want more than a pay check; they want careers that are fulfilling, interesting and meaningful. They don’t want to work rigid hours like their parents and grandparents did, but instead prefer flexibility and goal-oriented tasks.
Be aware of how your career choices influence your finances and lifestyle. Understand how much income you can realistically generate, given your career goals. Keep in mind that your job, even if not a traditionally high-paying one, can reap big personal rewards. At the same time, be prepared for the fact that you may have to supplement your income in other ways, depending on the lifestyle you choose.
3. How Do I Feel About Financially Supporting Other Family Members?
Inheriting money often comes with great responsibility. In the future, you may have to make financial decisions for not just yourself, but also for aging parents, your kids, siblings and even extended family.
In many families, there’s an expectation that more well-off members will take care of those less fortunate. It can create disappointment and hurt feelings if that doesn’t happen.
Consider how much responsibility you feel toward other family members and how much you would assist them financially, if needed. Also consider whether you have the expertise to help other family members deal with financial issues that may arise, such as arranging long-term care or struggling with debt.
4. How Does Philanthropy Fit into My Life?
Cultivating an interest in philanthropy today can help prepare you for decisions about charitable giving. What’s more, the types of organizations you prefer to support can affect your philanthropic decisions and legacy.
Think about how much of a responsibility you feel toward society as a whole. And how does that fit into your financial goals for the future? Also consider how your approach fits in with how older generations in your family have approached philanthropy. Some affluent families actively support nonprofits in a variety of ways: providing financial support, serving on boards and volunteering their time.
Answering these questions can help mentally prepare you for managing your family’s wealth in the future — by better understanding your feelings about money today.
