It Pays to Talk: How to Have the Essential Conversations With Your Family About Money and Investing [ABRIDGED]
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Does your family talk about money?
Do your kids understand your money values?
Do you and your mate agree on how you spend and invest your money?
Do you know if your parents are financially secure?
These are the questions that Carrie Schwab-Pomerantz and her father, Charles Schwab, ask at the beginning of this invaluable family financial primer. The authors acknowledge that these are difficult questions but stress that families must grapple with them and come up with answers.
Despite the proliferation of the financial news media, money remains a taboo subject in most families. Often the mere thought of talking about money with a family member causes enormous personal stress and confusion. But it doesn’t have to be that way. The goal of this father-daughter collaboration is to bring solid financial advice into the context of family, where it can be explored, understood, and implemented to the benefit of everyone.
The first essential thing that must happen is conversation, and It Pays to Talk is filled with advice about how to start talking. The authors are both working parents with a combined sixty-five years of knowledge and experience in the investment field. In this book they present a road map that every family can follow as they develop and implement an investment strategy and money-management plan.
They begin by covering the fundamental principles that every investor needs to understand in order to succeed for the long term, and then they move on to cover joining forces in marriage; building your family’s wealth regardless of market conditions; investing for your children’s future and raising money-savvy kids; retirement planning; estate planning for you and your parents; and dealing with the unexpected—insurance, divorce, and investing a windfall. Throughout the book, the authors offer advice about how to start the often difficult conversations that lead to smart decision-making, as well as how to talk gently, intelligently, and respectfully about the many issues that define and shape our attitudes about money.
It does pay to talk. This valuable and expert book will get you started and help you at every stage of your family’s investment career.
From the Hardcover edition.
Do your kids understand your money values?
Do you and your mate agree on how you spend and invest your money?
Do you know if your parents are financially secure?
These are the questions that Carrie Schwab-Pomerantz and her father, Charles Schwab, ask at the beginning of this invaluable family financial primer. The authors acknowledge that these are difficult questions but stress that families must grapple with them and come up with answers.
Despite the proliferation of the financial news media, money remains a taboo subject in most families. Often the mere thought of talking about money with a family member causes enormous personal stress and confusion. But it doesn’t have to be that way. The goal of this father-daughter collaboration is to bring solid financial advice into the context of family, where it can be explored, understood, and implemented to the benefit of everyone.
The first essential thing that must happen is conversation, and It Pays to Talk is filled with advice about how to start talking. The authors are both working parents with a combined sixty-five years of knowledge and experience in the investment field. In this book they present a road map that every family can follow as they develop and implement an investment strategy and money-management plan.
They begin by covering the fundamental principles that every investor needs to understand in order to succeed for the long term, and then they move on to cover joining forces in marriage; building your family’s wealth regardless of market conditions; investing for your children’s future and raising money-savvy kids; retirement planning; estate planning for you and your parents; and dealing with the unexpected—insurance, divorce, and investing a windfall. Throughout the book, the authors offer advice about how to start the often difficult conversations that lead to smart decision-making, as well as how to talk gently, intelligently, and respectfully about the many issues that define and shape our attitudes about money.
It does pay to talk. This valuable and expert book will get you started and help you at every stage of your family’s investment career.
From the Hardcover edition.
"synopsis" may belong to another edition of this title.
About the Author:
Carrie Schwab-Pomerantz is president of the Charles Schwab Corporation Foundation. She established and now spearheads Schwab’s highly respected Women’s Investing Network, an initiative designed to educate and inspire women investors across America. She lives with her husband, journalist Gary Pomerantz, and their three children in the San Francisco Bay area.
Charles R. Schwab is the founder, chairman, and co-CEO of the Charles Schwab Corporation, one of the nation’s largest financial services firms. He is the author of the bestselling You’re Fifty—Now What? and Charles Schwab’s Guide to Financial Independence. He lives in the San Francisco Bay area with his wife, Helen.
From the Hardcover edition.
Excerpt. © Reprinted by permission. All rights reserved.:
Charles R. Schwab is the founder, chairman, and co-CEO of the Charles Schwab Corporation, one of the nation’s largest financial services firms. He is the author of the bestselling You’re Fifty—Now What? and Charles Schwab’s Guide to Financial Independence. He lives in the San Francisco Bay area with his wife, Helen.
From the Hardcover edition.
Starting the Conversation
When Pete, a longtime colleague of ours, married his wife, Eleanor, in 1973, it would have been safe to assume that she, being a banker, would handle the finances while he, then a schoolteacher, would take a backseat. Then their son was born with a disability, and the couple decided that Eleanor should quit her job and stay home with him. Once Pete, who had returned to graduate school and obtained his MBA, became the only breadwinner, he also inherited the financial-decision-maker role.
At the same time Pete—a generous, jovial, and articulate man—turned into quite the spender, thinking nothing of buying an expensive suit that he’d wear only two or three times. To compensate for his champagne taste in clothes, Eleanor, when she shopped at all, would do so at discount stores (a detail she kept from Pete, who would have been horrified). Sure, her husband’s income had shot up, but so had his appetite for luxuries, including high-priced cars.
“We moved to California from New York, and I saw everyone driving around in BMWs,” explains Pete with a self-deprecating laugh and the kind of regret that only hindsight can bring. “I thought that must be the state car, so I went out and bought one.” Over the next fifteen years he bought another and another and another, just as soon as the mileage on the “old” car passed twenty thousand—or a newer model captured his fancy. Despite hefty sports-car price tags, he never thought to consult his wife about those—or any other—purchases.
That attitude, combined with an overall lack of communication, almost cost Pete his marriage. Since the couple never discussed money, let alone a savings or an investment strategy, Pete never knew how increasingly resentful his highly educated wife, who had spent ten years in the banking industry, was becoming about her lack of participation in the family finances or Pete’s spending decisions.
Pete and Eleanor may have avoided facing their issues, but they couldn’t escape the downfall of their marriage. After a separation of several months, the couple decided that divorce was inevitable, and together they headed to a financial planner to figure out how to split their assets.
But unlike so many similar stories, this one has a happy ending. “You guys obviously care about and love each other,” the financial planner observed one afternoon after numerous joint meetings. “What are you doing getting a divorce?” Thus prompted, Pete and Eleanor asked themselves the same question and subsequently decided to try to work out their differences. After months of marriage counseling and a lot of hard work, Pete and Eleanor learned how to communicate with each other about money and everything else. They identified what was important to them as individuals and as a couple.
The upshot? At forty-seven, Pete quit his job to devote himself full time to the nonprofit international health-related causes about which he’s passionate. Investments they’ve made together now finance their lifestyle, one in which they agree on each and every sizable purchase as a team. “Though I’m ashamed of my past behavior, I’m also proud of our courage to stick it out,” says Pete. “It’s so much easier to walk away from very difficult issues than to confront them head-on. I am the better—and we are the stronger—for it.”
Pete and Eleanor’s new financial policies and procedures, along with their ongoing discussions about values and priorities, led to their recently building a dream house in Sun Valley, Idaho. “In almost thirty years of marriage, this is the first major purchasing decision we ever made together,” admits Pete.
In short, Pete and Eleanor now make a point of dealing with their life together—and their money—as equal partners. Once every three months they meet with their financial advisor to review their finances and make (or revise) their money decisions for the next six months. Then they go out to a nice restaurant and discuss their decisions and plans.
What better way to reaffirm your love for each other than to talk about the life you’re living now and your dreams for the future?
The Emotional Side of Money
As Pete and Eleanor’s story so vividly shows, talking about money can allow you to build the life you want. In fact, we believe that financial security begins with a conversation—whether between spouses, between a parent and a child, or between an adult and an aging parent.
But these conversations aren’t easy, especially in the beginning. Most of us are used to chatting casually about the stock market or mortgage rates, but when it comes to candid, personal conversations about how much money we’ll need for retirement or how we’ll possibly be able to pay for our children’s college educations, the talk is much tougher. In a wealthy country where millions of investors have money in the stock market, there is still a desperate shortage of honest, candid talk about how we should be planning for the future.
And unfortunately, as Pete and Eleanor’s story also points out, not communicating about financial matters, from spending to investing to planning for the future, is an almost surefire way to undermine a relationship. So why, despite the obvious payoff and the equally obvious price of avoidance, do most people neither initiate nor participate in these essential family conversations about money? Because money is never just money, especially in the context of a family.
For starters, money is tied up with our deepest emotional needs (such as security, comfort, success, and confidence) and fears (such as failure, inadequacy, and poverty) as well as with our sense of self-worth and identity. And ultimately, it becomes a reflection of our relationships. “In the first part of our marriage, there were all these inequalities, and money was a huge unspoken one,” says Pete. “Now it’s more of an equal playing field.”
Like it or not, even your parents’ attitudes about money have likely influenced yours. If your father or mother always tried to save that little bit, you may have adopted the same fiscally restrained habits. Or like a pendulum, you may do the opposite now that you’re an adult, refusing to let those money-saving tactics run your life. Either way, you’re reacting to lessons learned at your parents’ knees.
For example, I have a friend whose father used to drive her crazy with his penny-pinching habits: He phoned her only after five p.m. (he had one of those old-fashioned phone plans where the rates dropped at night), and he parked his car in a lot a mile away from where he was going if he could save a dollar. In response, as a young girl, my friend would call her dad whenever the urge struck, even if it was a mere ten minutes before the rates changed, partially to prove that her actions weren’t being dictated by the chance to save a buck. Valuing time and convenience more than economy, she often took cabs instead of buses and paid a housekeeper for cleaning she could easily have done herself. Figuring that you only go around once, she routinely indulged in expensive wine and top-notch restaurants. Only lately, many years later, has she come to recognize how much all those indulgences compromised her ability to save for her future and the things that mattered more.
My colleague Tom’s financial baggage also stems from his upbringing. Despite a steady income, his parents sometimes ran short of cash. Since Tom consistently held jobs as a kid—doing a paper route or umpiring Little League games—he usually had some cash on hand. “As a twelve- or thirteen-year-old, I was proud to always have a few hundred bucks,” he recalls. “I remember my dad and mom borrowing from me a few times to buy groceries or go out to a movie. In those pre-ATM days, I was like their bank for short-term credit.”
Not surprisingly, this situation made Tom quite resentful in the long run. Thirty years later those emotions continue to affect how he deals with finances and money-related communication, but not in a positive way. Even today Tom never talks to his parents about their financial position since it brings back uneasy memories. He and his wife don’t talk very much about their financial decisions or long-term plans either. While Tom attributes a lot of this silence to juggling two careers and raising two children, he also admits that his early negative money associations may play a part in his current attitude.
Sidestepping Common Behavioral Traps
Another downside of our silence about money is that we become even more likely to make financial decisions based on emotion rather than on logic or research. In Why Smart People Make Big Money Mistakes (Simon & Schuster, 1999), a terrific book that I recommend to all my friends and clients, journalist Gary Belsky and psychologist Thomas Gilovich summarize a new branch of economic research, called behavioral economics, that examines many of the most common traps that lead us to make poor money decisions.
Let me give you just a few examples. If you tend to treat your hard-earned income differently from the way you treat other money—say a tax refund or a lottery winning—you’re guilty of what behavioral economists call mental accounting. This concept, developed by Richard Thaler of the University of Chicago, describes our tendency to categorize and value our money according to its source or how we spend it. Mental accounting can be dangerous, because in reality one dollar is worth just as much as the next. One hundred dollars that you get from a windfall will buy you just as much as one hundred dollars you’ve saved. Likewise, if you feel much freer spending money when you use a credit card than when you pay in hard cash, you ar...
When Pete, a longtime colleague of ours, married his wife, Eleanor, in 1973, it would have been safe to assume that she, being a banker, would handle the finances while he, then a schoolteacher, would take a backseat. Then their son was born with a disability, and the couple decided that Eleanor should quit her job and stay home with him. Once Pete, who had returned to graduate school and obtained his MBA, became the only breadwinner, he also inherited the financial-decision-maker role.
At the same time Pete—a generous, jovial, and articulate man—turned into quite the spender, thinking nothing of buying an expensive suit that he’d wear only two or three times. To compensate for his champagne taste in clothes, Eleanor, when she shopped at all, would do so at discount stores (a detail she kept from Pete, who would have been horrified). Sure, her husband’s income had shot up, but so had his appetite for luxuries, including high-priced cars.
“We moved to California from New York, and I saw everyone driving around in BMWs,” explains Pete with a self-deprecating laugh and the kind of regret that only hindsight can bring. “I thought that must be the state car, so I went out and bought one.” Over the next fifteen years he bought another and another and another, just as soon as the mileage on the “old” car passed twenty thousand—or a newer model captured his fancy. Despite hefty sports-car price tags, he never thought to consult his wife about those—or any other—purchases.
That attitude, combined with an overall lack of communication, almost cost Pete his marriage. Since the couple never discussed money, let alone a savings or an investment strategy, Pete never knew how increasingly resentful his highly educated wife, who had spent ten years in the banking industry, was becoming about her lack of participation in the family finances or Pete’s spending decisions.
Pete and Eleanor may have avoided facing their issues, but they couldn’t escape the downfall of their marriage. After a separation of several months, the couple decided that divorce was inevitable, and together they headed to a financial planner to figure out how to split their assets.
But unlike so many similar stories, this one has a happy ending. “You guys obviously care about and love each other,” the financial planner observed one afternoon after numerous joint meetings. “What are you doing getting a divorce?” Thus prompted, Pete and Eleanor asked themselves the same question and subsequently decided to try to work out their differences. After months of marriage counseling and a lot of hard work, Pete and Eleanor learned how to communicate with each other about money and everything else. They identified what was important to them as individuals and as a couple.
The upshot? At forty-seven, Pete quit his job to devote himself full time to the nonprofit international health-related causes about which he’s passionate. Investments they’ve made together now finance their lifestyle, one in which they agree on each and every sizable purchase as a team. “Though I’m ashamed of my past behavior, I’m also proud of our courage to stick it out,” says Pete. “It’s so much easier to walk away from very difficult issues than to confront them head-on. I am the better—and we are the stronger—for it.”
Pete and Eleanor’s new financial policies and procedures, along with their ongoing discussions about values and priorities, led to their recently building a dream house in Sun Valley, Idaho. “In almost thirty years of marriage, this is the first major purchasing decision we ever made together,” admits Pete.
In short, Pete and Eleanor now make a point of dealing with their life together—and their money—as equal partners. Once every three months they meet with their financial advisor to review their finances and make (or revise) their money decisions for the next six months. Then they go out to a nice restaurant and discuss their decisions and plans.
What better way to reaffirm your love for each other than to talk about the life you’re living now and your dreams for the future?
The Emotional Side of Money
As Pete and Eleanor’s story so vividly shows, talking about money can allow you to build the life you want. In fact, we believe that financial security begins with a conversation—whether between spouses, between a parent and a child, or between an adult and an aging parent.
But these conversations aren’t easy, especially in the beginning. Most of us are used to chatting casually about the stock market or mortgage rates, but when it comes to candid, personal conversations about how much money we’ll need for retirement or how we’ll possibly be able to pay for our children’s college educations, the talk is much tougher. In a wealthy country where millions of investors have money in the stock market, there is still a desperate shortage of honest, candid talk about how we should be planning for the future.
And unfortunately, as Pete and Eleanor’s story also points out, not communicating about financial matters, from spending to investing to planning for the future, is an almost surefire way to undermine a relationship. So why, despite the obvious payoff and the equally obvious price of avoidance, do most people neither initiate nor participate in these essential family conversations about money? Because money is never just money, especially in the context of a family.
For starters, money is tied up with our deepest emotional needs (such as security, comfort, success, and confidence) and fears (such as failure, inadequacy, and poverty) as well as with our sense of self-worth and identity. And ultimately, it becomes a reflection of our relationships. “In the first part of our marriage, there were all these inequalities, and money was a huge unspoken one,” says Pete. “Now it’s more of an equal playing field.”
Like it or not, even your parents’ attitudes about money have likely influenced yours. If your father or mother always tried to save that little bit, you may have adopted the same fiscally restrained habits. Or like a pendulum, you may do the opposite now that you’re an adult, refusing to let those money-saving tactics run your life. Either way, you’re reacting to lessons learned at your parents’ knees.
For example, I have a friend whose father used to drive her crazy with his penny-pinching habits: He phoned her only after five p.m. (he had one of those old-fashioned phone plans where the rates dropped at night), and he parked his car in a lot a mile away from where he was going if he could save a dollar. In response, as a young girl, my friend would call her dad whenever the urge struck, even if it was a mere ten minutes before the rates changed, partially to prove that her actions weren’t being dictated by the chance to save a buck. Valuing time and convenience more than economy, she often took cabs instead of buses and paid a housekeeper for cleaning she could easily have done herself. Figuring that you only go around once, she routinely indulged in expensive wine and top-notch restaurants. Only lately, many years later, has she come to recognize how much all those indulgences compromised her ability to save for her future and the things that mattered more.
My colleague Tom’s financial baggage also stems from his upbringing. Despite a steady income, his parents sometimes ran short of cash. Since Tom consistently held jobs as a kid—doing a paper route or umpiring Little League games—he usually had some cash on hand. “As a twelve- or thirteen-year-old, I was proud to always have a few hundred bucks,” he recalls. “I remember my dad and mom borrowing from me a few times to buy groceries or go out to a movie. In those pre-ATM days, I was like their bank for short-term credit.”
Not surprisingly, this situation made Tom quite resentful in the long run. Thirty years later those emotions continue to affect how he deals with finances and money-related communication, but not in a positive way. Even today Tom never talks to his parents about their financial position since it brings back uneasy memories. He and his wife don’t talk very much about their financial decisions or long-term plans either. While Tom attributes a lot of this silence to juggling two careers and raising two children, he also admits that his early negative money associations may play a part in his current attitude.
Sidestepping Common Behavioral Traps
Another downside of our silence about money is that we become even more likely to make financial decisions based on emotion rather than on logic or research. In Why Smart People Make Big Money Mistakes (Simon & Schuster, 1999), a terrific book that I recommend to all my friends and clients, journalist Gary Belsky and psychologist Thomas Gilovich summarize a new branch of economic research, called behavioral economics, that examines many of the most common traps that lead us to make poor money decisions.
Let me give you just a few examples. If you tend to treat your hard-earned income differently from the way you treat other money—say a tax refund or a lottery winning—you’re guilty of what behavioral economists call mental accounting. This concept, developed by Richard Thaler of the University of Chicago, describes our tendency to categorize and value our money according to its source or how we spend it. Mental accounting can be dangerous, because in reality one dollar is worth just as much as the next. One hundred dollars that you get from a windfall will buy you just as much as one hundred dollars you’ve saved. Likewise, if you feel much freer spending money when you use a credit card than when you pay in hard cash, you ar...
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- PublisherRandom House Audio Assets
- Publication date2002
- ISBN 10 0739302477
- ISBN 13 9780739302477
- BindingAudio CD
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It Pays to Talk: How to Have the Essential Conversations With Your Family About Money and Investing [ABRIDGED]
Published by
Random House Audio Assets
(2002)
ISBN 10: 0739302477
ISBN 13: 9780739302477
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