Study Finds Parents and Adult Children Struggle to Communicate about Critical Financial Decisions

A new study by Fidelity revealed that parents and their adult children have difficulty communicating with each other about financial decisions, such as inheritance and estate planning, eldercare, and retirement. Learn about tips and new resources that can make family discussions about financial decisions easier.

Fidelity Investments^® has released the results of its first-ever Intra-Family Generational Finance Study, which shows adult children and their parents struggle to communicate on key financial topics that include retirement planning, providing care for elderly parents and inheritance strategies. The study analyzed levels of disagreement and miscommunication between parents and their adult children on a range of sensitive topics, and found that adult children are not only anxious about their own finances, but also their parents’ future health, retirement security and estate plan.     

Highlighting the vast disconnect, the study revealed 97 percent of parents and children disagree on whether a child will take care of his or her parents if they become ill. Major miscommunication also exists when discussing inheritance and estate planning. In fact, children are underestimating the value of their parent’s estate by more than $100,000, on average. Additionally, neither side is effectively communicating about retirement readiness. As a result, 24 percent of children believe they will have to help their parents financially in retirement, while nearly all (97 percent) of parents say they will not need help.

“Given the economic pressures facing families today, it’s troubling that detailed conversations are not happening, especially among those in the sandwich generation who may be grappling with competing financial priorities ranging from planning for their own retirement and paying for a child’s college education to dealing with eldercare, estate planning and retirement challenges with their parents,” said Kathleen A. Murphy, president of Personal Investing at Fidelity Investments. “Whether it’s a parent facing a shortfall in retirement income or an adult child weighing the tax implications of an inheritance, too often discussing these issues is considered taboo within families, but real emotional and financial consequences emerge when such conversations don’t happen or lack sufficient depth.”

Adult Children Seeking Greater Detail from Parents on a Range of Topics

While approximately 95 percent of parents and their adult children say at least some conversations have taken place, significant gaps in communication were evident in a number of areas including living in retirement, eldercare and estate planning. In all cases, very few adult children believe the conversations were very detailed. For example:

• Health and Eldercare Discussions Significantly Lack Detail: While nearly nine in 10 (89 percent) adult children and parents agree that health and eldercare is an important topic of conversation, 63 percent disagree on the level of detail that has been covered to date. In fact, only 10 percent of children believe the conversations were very detailed.
• Major Disagreement on Depth of Estate Planning Conversations: Almost nine in 10 (89 percent) adult children and parents agree estate planning is an important topic to discuss, but 70 percent disagree on the depth of the conversations that have taken place and only one in five (19 percent) children say the discussions have been very detailed.
• Retirement Readiness Not Discussed in Detail: 65 percent of adult children and parents agree that discussing retirement readiness is an important topic, but 72 percent disagree on the level of detail that has been covered to date; and only 11 percent of children believe the conversations were very detailed.

In fact, when asked who they are comfortable with when talking about their financial situation, the study found that both parents (68 percent) and their adult children (60 percent) feel more comfortable discussing with a third-party financial professional than to each other.

Barriers to Starting the Conversation Exist on Both Sides

While more than nine in 10 (94 percent) adult children and their parents agree it is important to have frank conversations about wills and estate planning, eldercare or covering retirement expenses, there are significant barriers to even starting these discussions within families. The top barrier noted by 30 percent of parents is they don’t want their adult children to overly rely on a potential inheritance. And for adult children, 40 percent say the top barrier is that they feel like it’s not any of their business to ask their parents about these topics.