Discussing matters of money does not come naturally. Talking about our finances, such as how much we earn or hold in savings, is taboo for many of us.
It is no wonder, then, that we are often unable to open up to even close family members about our financial affairs. For women, this might come down to not feeling confident enough to discuss what can, on the surface, appear to be complex financial arrangements, such as investing and pension plans. Many of us are too embarrassed to ask questions for fear of appearing ignorant.
If you have ever felt this way, you may be reassured to know you are not alone. Research by YouGov, commissioned by Lloyds Banking Group, found that 44% of people have avoided having a discussion about money. Among those who had a conversation about finances with their family and friends, 32% found it stressful, while 43% identified feeling embarrassed.
However, it is vital that we ensure these conversations take place in the home – not only between spouses but also with dependents. The more open families are about their finances and what the older generation intends to do with their wealth, the better the outcome when the next generation inherits those assets. This not only ensures that those inheriting can act on their parents’ or grandparents’ wishes, but they will also have the knowledge and tools to manage the wealth responsibly.
No financial surprises
Talking about wealth is only one aspect – it’s also important that you are actively taking part in the decision-making. A worldwide study by UBS, called Own Your Wealth, found that in the UK, 62% of women defer to their partner when it comes to longer term financial decisions and only 15% take the lead.
At a practical level, being up-to-speed with family finances and feeling able to discuss investments, pensions and savings openly is important, given that women can expect to live longer than men. In the event there is a change in circumstances, such as death, serious illness or divorce, understanding your financial position can make a stressful or life-changing event that bit easier to cope with.
The Quilter Women and Wealth Management Strategic Report cites a UBS study that interviewed widows and divorcees. It found that 74% ‘discovered negative financial surprises’ and that 76% wished they had been more involved in long-term financial decisions.
One way to ensure both partners in any relationship remain on top of all household finances and investments is to instigate regular discussions – whether weekly, monthly, or as often as is necessary. This also goes for attending meetings with financial planners and investment managers, as it is important that both people in a relationship understand how family assets are being managed.
If you have neither a spouse nor dependents and all the financial decisions fall to you, choose an adviser and investment manager that you feel comfortable talking to and asking questions of. The more often you discuss your finances, the easier it will become.
The next generation
Over the next 10 years, $8.6 trillion of global high net worth wealth is expected to change hands, according to a Global Data report Intergenerational Wealth Transfer: Seizing the HNW Opportunity. This intergenerational wealth transfer is already underway.
If the next generation are to inherit a potentially significant sum of money, they need to know what to do with it. This is why it is so important that conversations about money and investments include any dependents.
A report by the WealthiHer Network from 2019 found that 59% of women stated the purpose of wealth was mainly to offer security and comfort to the family. Given that research has shown wealth and family go hand-in-hand for women, ensure that discussions around family finances take place.
In particular, make it a priority to discuss inheritance. It may come as a surprise for children – especially adult children – to learn that they will inherit some money. But it will be an even bigger shock if they are under the illusion they will be left a certain amount of wealth, only to find out a parent’s will has changed, or the taxman can claim a proportion.
Here at Quilter Cheviot, we hope that by imparting our knowledge we can make those conversations free of stress and embarrassment. In turn, you can talk about wealth, investments and inheritance with ease and confidence to any family member.
Author
Vanessa Eve
Investment Manager, Quilter CheviotWomen and investing
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