Carrie Schwab-Pomerantz - It Pays to Talk: How to Have the Essential Conversations with Your Family About Money and Investing

OTHER BOOKS BY CHARLES R. SCHWAB

Youre FiftyNow What?
Charles Schwabs Guide to Financial Independence
How to Be Your Own Stockbroker

The information provided here is for general informational purposes only, and should not be considered an individualized recommendation or personalized investment advice. Although all reasonable efforts have been made to make sure that the information contained in this book is accurate as of the date of publication, the authors and the publisher disclaim any liability with respect to the accuracy or timeliness of that information.

In an effort to protect their privacy, the authors have modified the identities of the real people whose financial situations are discussed in this book.

Copyright 2002 by The Charles Schwab Corporation

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.

Published by Crown Business, New York, New York.
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CROWN BUSINESS is a trademark and the Rising Sun colophon is
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Library of Congress Cataloging-in-Publication Data
Schwab-Pomerantz, Carrie.
It pays to talk: how to have the essential conversations
with your family about money and investing / Carrie Schwab-Pomerantz
and Charles R. Schwab.1st ed.
1. Finance, Personal. 2. Investments. I. Schwab, Charles. II. Title.
HG179.S3346 2003
332.02401dc21 2002005994

eISBN: 978-1-4000-4882-3

v3.1

To families who already talk about money
and to those who are about to.

This book was a true team effort. At the helm, Joanne Cuthbertson guided its creation from start to finish, imparting her special insights and expertise. Linden Gross helped articulate our message and put it on paper. As we worked together month after month, we not only gathered the information you see on these pages, but we also created a personal bond that helped shape the spirit of this book.

Special thanks to the talented Bo Caldwell, who once again captured the essence of our philosophy. We are also indebted to the generous support of the Schwab Center for Investment Research. Thank you Mark Riepe, Darryl Forman, Jim Peterson, Bryan Olson, Rande Spiegelman, Leslie Gent, and Robin Vroom. We also want to thank Schwab employees Rene Kim, Leslie Eggerling, Jim Wilroy, Colita Ellis, Leila Bost, and Stephanie Becker for their wisdom and guidance, as well as Mike Ferguson, our super agent, Gail Ross, and our top-notch editor, Annik La Farge. And thank you to Nicole Young, whose vision inspired us to pursue this topic.

And finally, we could not have written this book without the contributions of the scores of colleagues, clients, friends, and family members who not only shared their personal stories but agreed to allow us to share these experiences with you. We are touched by their candor and generosity.

Carrie Schwab-Pomerantz
Charles R. Schwab

To our readers:

We have a question for you: Does your family talk about money? Think about it. Does money come up in your daily conversations? 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?

All of these are tough issues that you may not have addressed. For if you and your loved ones are at all typical, chances are that while you may read the business section of the newspaper and talk about the stock market, you have a harder time when the topic is personal.

There is no question that really talking about moneyand by that we mean having candid personal conversationsisnt easy. In fact, we seem to talk about politics and religion more easily than we talk about our money. And thats saying something!

To an extent, theres a reason for this awkwardness: Personal finances are emotionally charged. Money and wealth reflect our value systems and sense of self-worth, so the moment the subject is broached, the stakes rise. Couple that with years of socialization in the financial code of silence, and its no wonder that the word about money is mum.

Most of us have grown up just accepting these money taboos. All that began to change for the two of us in the fall of 2000, when Carrie launched Schwabs Womens Investing Network, an educational program for women. Our mission: to inspire women to increase their financial knowledge and to share that knowledge with others. First, however, we had to find out more about how we Americans feel about those finances were so reluctant to discuss.

One of Carries first steps was to commission a Harris poll to study attitudes about money and investing. Not only did the poll reveal that 44% of women and 27% of men lack confidence in their investing skills, it also showed that most people attribute their discomfort to a lack of education and exposure growing upin other words, to a lack of meaningful talk. At the same time, our investment consultants across the country began reporting similar findings. Their clients, both men and women, wanted to get their financial affairs in order but simply didnt know where to start. Clearly the need for open communication wasnt restricted to women. The sexes were very similar when it came to avoiding money-related conversations.

Whats wrong with this picture? In our view a lot, which is why we wrote the book you are holding. If there is one message you take away from these pages, we want it to be an understanding of how crucial it is to have honest discussions about money and investing with those you care about.

Why? The fact is that if you dont talk to your family about money, chances are that no one else will. Our schools dont teach our kids to manage money, and for the most part neither do we, their parents. Our Harris poll showed that even though most parents think that they, not the schools, should be in charge of their childrens financial education, in reality fewer than one-third have regular talks with their children about money.

Further, talking about money with your spouse or partner is one of the most important keys to a healthy, thriving partnership. Actual disagreements and unspoken differences in attitudes about money can damage a relationship in record time. Weve seen it happen over and over again.

And if your aging parents cant rely on you, where can they go? If they happen to be at a point in their lives where they could use some financial assistancewhether that means simply a little guidance from you or actual financial supportour feeling is that helping them is not only a duty but a privilege.

The good news is that talking about money with your family doesnt have to be hard. It may feel awkward at first, but with a little effort it gets easier. Because feelings about money are both highly personal and highly individual, no one approach will fit every family. And every situation is different, so the way in which you handle these conversations will be as unique as you are.

But the payoff can be substantial. Talking about money can be very liberating and bring you closer to your family. We also feel that teaching someone to handle money and invest wisely is one of the most important things you can do. Its a skill we all need for our entire lives, and it is, in our experience, central to success. By broaching the subject and encouraging the conversation, you give those you care about, whether older or younger, whether related or not, a wonderful gift. Remember that expression