By Financial Planning Standards Council
When boomers, members of the generation X and millennials come together under one roof, differing experiences and opinions about money can lead to family friction.
Each generation has a different perception of risk, which typically comes from early experiences with money, says Scott Plaskett, a Certified Financial Planner® professional and chief executive officer at Ironshield Financial Planning in Toronto.
“Many boomers grew up at a time when money was scarce – this makes them hesitant to spend it even if they can afford it. Their emotional response to a five per cent loss in their portfolio can be far greater than the emotional high from a five per cent gain,” he says. “Gen X-ers want freedom from that kind of thinking but still worry about making ends meet, paying down debt and taking care of aging parents. At the same time, millennials are freer with money and less concerned about debt. They jump from one job to the next and want to fully enjoy the lifestyle experience rather than worry about a retirement date. These are all things that scare the generations that came before.”
How can harmony reign when the money mantras of grandma, parents and kids are in conflict? Communication is the key, says Mr. Plaskett.
“The older generation’s biggest fear is the transfer of hard-earned wealth to younger generations who are not properly prepared to receive it,” he says. “Every generation must be brought into the conversation about estate planning, major purchases and household expenditures.”
Regular discussions will help ensure that all three generations feel understood:
- Boomers are comfortable that their legacy will be valued rather than spent irresponsibly.
- Gen X-ers are not overwhelmed by the weight of bills, careers and being sandwiched between two generations.
- Millennials are not constantly criticized and marginalized.
A financial planner can help get the ball rolling, adds Mr. Plaskett. With an unbiased third-party present, logic rather than emotion will drive the discussion between the parties and result in a multi-generation plan that works at all levels.
Once all the ducks are in a row, a solid plan offers benefits to the entire family, he says.
- Boomers can feel they have the permission to stop denying themselves and take that first-class trip they’ve saved for.
- Gen X-ers gain the knowledge of how much they need to put aside for the future as well as the go-ahead to use the balance guilt-free.
- Millennials receive direction with options for living life to the fullest now while building wealth for the future.
If you need a qualified professional to help put your household on a sound financial footing, FPSC’s Find a Planner or Certificant tool can help put you in touch with someone in your area. Access additional resources here.