How to talk to family about money (according to finance experts)

Talking to family about money can be something people get very concerned about. It’s still a taboo subject for many, particularly in the UK context where conversations about inheritance, the management of a family business, or tax responsibilities can turn into awkward dinner table affairs. But avoiding the topic completely could have a detrimental effect on family wealth in the long-term.

After the UK Government froze inheritance tax thresholds until April 2028, increases in asset prices threaten to push many more families above the relevant thresholds, which they may not be prepared for. It’s clear this is already happening:

• £7.1 billion was paid in UK inheritance tax in the year to March 2023, a 16% increase on the previous year
• But our most recent Charles Stanley survey shows only 64% of respondents have discussed their wealth plan with beneficiaries
• 14% of respondents don’t intend to have the conversation at all.

Aside from the finances, family disputes may arise if the topic of wealth is never discussed between generations. Many of us have heard stories about siblings fighting over inheritance or future business ownership - the hit TV show Succession serves as a prime example. Yet by approaching the conversation in advance, plans can be made to set your family’s wealth and long-term interests in good stead.

To give you a starting point, we spoke to a range of financial planning and investment experts at Charles Stanley to hear their advice for families who want to talk about money, but perhaps don’t know where to start.

Seven tips when talking to family about money

1. Mention a friend

The toughest point of a tricky money conversation is often knowing where or how to start it. Katie Tasker, Investment Manager at Charles Stanley, suggests making the conversation feel less personal by showing that everyone else is talking about it. “So, you could say that your friends were discussing wills and inheritance tax with their parents, and it reminded you to ask your family. That can be an effective way to start a conversation.”

2. Don’t wait to talk about inheritance

Conversations about inheritance tax can feel awkward, but there’s no point putting it off, says Simon Davis, Director of Financial Planning at Charles Stanley. ‘With good financial planning, the impact of inheritance tax can be minimised by taking advantage of legitimate exemptions, although many of these can be complex which is why they are often missed. Importantly, the longer you leave it, the fewer options you have. It’s important that families talk about inheritance so they can plan their future finances. Not only will everyone be clear on what to expect, which can prevent family conflict further down the line, but it means as much of your hard-earned money as possible is passed on to loved ones.

3. Seek support if you need it

If there’s an issue you just can’t seem to move past, consider speaking to someone who can offer an objective opinion, such as a professional financial adviser. Simon Davis says: “I often encourage adult sons or daughters to attend meetings and use me as their adviser to get a handle on a situation if needed.”

How families prepare for meetings can vary. “If you are a very business-like family you could set up an agenda in advance, but for some families that could feel restrictive – it depends. I would usually start a meeting with a summary of your overall position: what everyone’s wishes and goals might be, causes and charities close to you, and so on. So this might be a good thing to think about in advance.”

To encourage other members of your family to open up, talk honestly about your own views, strengths, and weaknesses when it comes to money. This approach might mean allowing yourself to be vulnerable and admitting something you struggle with, such as budgeting or checking your bank statements regularly.

4. Slowly, slowly, wins the race

Louis Coke, a Senior Investment Manager at Charles Stanley, says a ‘big bang’ approach of disclosing all financial assets and details in one go should only be used if necessary. ‘There are some situations (terminal illness, for example) where the circumstances dictate that this is really the only option. For the most part though, you might prefer to think of this as a series of conversations, rather than a one-time event. As things progress, you might include your family in meetings with your financial adviser or wealth manager, if you have one. By being present in these meetings, they can get a better understanding of the family wealth story and how the pieces fit together.

5. Set ‘long term capital’ and ‘spending money’ apart

Louis Coke goes one further to explain why many high-net-worth families are good at compartmentalising their financial life. ‘In a lot of cases, wealth people have very firm boundaries around what is long term or ‘family’ money and what is ‘their’ money. Quite often, ‘their’ money pays for the day to day expenses and comes from their earnings in their jobs or businesses. Family money, on the other hand, is essentially used as an emergency fund or to assist with the purchase of ‘good assets’, so things like houses, or to pay for an extension or renovations. Essentially, the family money should be invested, whereas their own earned income can be ‘spent’. This is quite a valuable distinction and one that can be helpful in not only leaving the investments to compound and grow, but also in not letting your life get distorted by what can be some quite large investment figures in some cases.’

6. Think about later life

As people get older, conversations about their finances become even more important. Julie Crombie, Financial Planner at Charles Stanley, suggests that tying the discussions to things you want to do in later life can make it less awkward. “Everyone has views on what they want to do when they get older, such as whether they want to stay in their home or downsize,” she says. “This issue can be neutral ground and a step to talking about money.”

7. Take your opportunity

Something significant happening in your family’s life can be a useful conversation starter. 'If one of your children is going to university, a chat about budgeting can help them start thinking about the future,” says Tsitsi Mutiti, Investment Manager at Charles Stanley. 'That’s a good way to move the conversation to the next generation.”

There's no need to tackle this on your own - speak to a professional

Be sure about your financial situation, now and later in life; with personalised financial advice and bespoke investment portfolios. Request a call back from one of our Financial Professionals, who can help you find security and the service to suit your needs.

*Please note: Research carried out by Charles Stanley in partnership with The Nursery between 27^th September and 10^th October 2022. Sampling 203 high-net-worth investors with over £500,000 investible assets.