Let's be honest: many of us are afraid of becoming our parents. But our parents have a huge impact on our relationship with money. For instance, the majority of us are uncomfortable talking about money because we were raised to think it's taboo. This has resulted in devastating consequences. According to the National Endowment for Financial Education report, only 24% of Millennials exhibit basic financial literacy. This means a whopping 75% of a generation is not prepared for major financial milestones such as saving for retirement, buying a house, and investing. Experts warn that unless we change our relationship with money, we may not achieve financial freedom. So, if you want to change this trend, consider these generational money norms.
Leave Your Kids an Inheritance at All Costs
Many parents want their kids to have something when they pass. Many want their kids to inherit a family home and other assets. Although the idea is good, you shouldn't sacrifice your own well-being trying to achieve it. After all, most kids want their parents to enjoy their lives. So, don't beat yourself if you can't afford to leave them an inheritance.
Talking About Money Is a Taboo Generational Money Norm
A FINRA study shows that over 50% of American adults admit that thinking about their financial state makes them nervous. Close to 45% say talking about it is even more stressful. If you're one of them, it's time to change your strategy. Unless you break the taboo, you're likely to make the same mistake in terms of generational money norms. The good news is that you're not the first one.
Many Americans who've succeeded in accumulating wealth and achieving financial freedom say having open conversations about money is the best way to learn and grow. Also, it's important to keep in mind that although your family background may influence how you see finances, it shouldn't define your story. You can change your mindset.
Don't Ever Cut Off Your Kids Financially
It can be extremely difficult for parents to cut off their children financially. That's why it's not uncommon to see parents giving their kids monthly allowances even if they're old enough to fend for themselves. While it's OK to want to support your kids, it pays to be cautious. Helping your kids too much can do more harm than good.
Apart from draining your retirement savings, it can also destroy the financial future of your loved one. So encourage your adult children to make their own money and support themselves. This will boost their confidence and propel them to achieve financial independence sooner.
Don't Separate Your Finances in Marriage
A majority of our parents put their finances in joint accounts, sharing everything. But that may not work today. Most couples, instead, choose to keep their finances separate. Others are taking a hybrid system of having shared accounts and individual accounts. According to a 2021 study by Fidelity, 20% of couples listed money as their greatest relationship challenge. So, it may be wise to reconsider these generational money norms.
But while at it, remember that every couple is unique. What works for others may not work for you. So, pick what works best for you and your partner. Just be sure to openly communicate about money and share your financial aspirations to ensure your life goals are in sync.
Learn More About Generational Money Norms
While growing up, you may have been told lots of "normal things" about money, like don't talk about money, sacrifice to leave your kids an inheritance, never keep separate accounts in marriage, or never cut off your kids financially.
These standards may have worked in the past but they no longer hold. If you want to achieve financial freedom, you may need to change your mindset and take a closer look at them. Good luck!