A shroud of secrecy has traditionally been placed over the family finances – with parents reluctant to talk money with their own children let alone anyone outside. But, as Stuart Wilson, corporate marketing director of more 2 life, argues, with the Bank of Mum and Dad and equity release offering opportunities for the generations to support each other with financial challenges, isn’t it time we started opening up to our loved ones about money matters?
There was a period of time, in the middle of the 1980s, when my parents’ financial situation was so dire that we were no more than one or two further missed mortgage payments away from having our home repossessed.
At the time, me and my younger brother knew nothing about the details of this, other than we were under instructions to tell anyone we didn’t know who phoned up or knocked at the front door, asking to speak to mum or dad, that they “weren’t in”. It was only years later, relatively recently in fact, that my dad revealed how close they came to financial disaster, having mortgaged themselves to the hilt to buy their first house together and maxed out on the ‘never-never’ with credit cards and store cards, only to be hit by a double-whammy of rapidly rising interest rates and my Dad’s redundancy.
Fortunately, they managed to cling on and eventually dig themselves out of the financial black hole they had fallen into. And I understand why they tried so hard to shield their teenage sons from the worry of potential homelessness. But as research from more 2 life has recently revealed, we are still a nation wedded to extreme privacy when it comes to discussing financial matters within families.
Almost a third of children revealed that they have never discussed their parent’s financial situation as a family and 32% of parents aged 55+ report that their children know nothing about their finances as they choose not to discuss such matters with them.
Consequences of privacy and secrecy
Privacy, in respect of financial matters, is all perfectly understandable but it can have consequences and further, unsettling evidence of this was revealed in the research. For example, a quarter (24%) of children revealed that they would not try and discuss financial matters with their parents even if there were obvious signs that they were struggling with paying bills, keeping the heating on or if they became ill. When privacy tips over into secrecy and children feel unable or unwilling to pry, even if their parents are in obvious financial distress, we clearly have a societal problem that needs resolving.
Today, the finances of families are more intertwined than ever before, even if we are unwilling to face up to this fact. An example of this is the ‘squeezed middle’ of adult children trying to balance the financial needs of their own children as well as their elderly parents. And of course, we have the growth in the importance of the ‘Bank of Mum & Dad’ as a vital source of capital for the deposits of their first-time buyer children.
Vital role of families in equity release
Equity release is an important financial tool that many older homeowners could use to help alleviate financial pressures – either their own or those of their family – but it can be an emotive subject and one that is best discussed openly. Indeed, family can play a vital role in a client’s equity release journey and specialist advisers will always recommend that a client involves the family during the advice process, especially those (such as children) who will likely be affected by the outcome in terms of future inheritance.
With the over-55s in the UK sitting on well in excess of a trillion pounds of housing equity, these largely ‘asset rich/cash poor’ retirees have access to a source of finance that could be transformational in terms of retirement outcomes – but if parents won’t discuss it and children won’t ask, there are many who will struggle on through the latter years of their lives unnecessarily, or miss opportunities to help children and grandchildren with cash lump sums that would take them years to save up themselves, if at all.
Honesty can help us find solutions
As a nation, we need to get our heads out of the financial sand and become a little more honest with our nearest and dearest regarding our financial situation, hopes, fears and dreams. Only then, and with the help of a financial expert, can we start getting to the heart of the problems and the potential solutions.
As my mum and dad found out, you can only dodge the phone calls and letters for so long. Eventually, you have to stop ignoring and start talking about your finances. And even if they are on a sound footing, being more open about financial matters and keeping the channels of communication open with loved ones is a habit we should all work harder at adopting for our own, as well as their financial wellbeing.
Stuart joined as the B2B Marketing Director for more 2life in July 2014. He has over 25 years of experience in the Financial Services sector, working for a range of well-known brands including Friends Provident, Abbey Life and Just Retirement. He also ran his own marketing agency specialising in helping advisers working in the mortgage market.
