Learning to Launch: The Benefits of Building a Personal Balance Sheet

March 16, 2018
How can you start a conversation with your young adult child about her goals and what she may envision for her future? BBH Relationship Manager Laura Salibello discusses creating a balance sheet to engage young adult children in a conversation about current and future spending needs and goals.
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How can you start a conversation with your young adult child about her goals and what she may envision for her future? This can be a difficult question to both ask and answer. Given this complexity, we believe using tools to facilitate a dialogue is essential, and engaging in these conversations early is critical.

One approach is to introduce the concept of a personal balance sheet, which is an overall snapshot of a person’s wealth at a specific point in time that includes assets (what you own), liabilities (what you owe) and net worth (assets minus liabilities). Not only does this exercise introduce a critical financial concept, but it is also a great discussion starter that can illuminate your child’s goals and beliefs.

Begin by creating a personal balance sheet for this moment in time. During college or immediately after, your child’s personal balance sheet may only have a few items. It most likely has more liabilities, such as student loans, than assets. After completing the current balance sheet, have your child fill out an aspirational balance sheet for 10 or 20 years from now. Maybe there is a home or a car on the asset side; perhaps the liabilities change from student loans to a mortgage.

After completing both balance sheets, take the opportunity to ask questions and have a meaningful discussion around this exercise. Some questions for you and your child to consider include:

  • What are the differences between the current balance sheet and future balance sheet?
  • What is not on the balance sheet that may be typical for someone their age, such as a student loan? Why is that important?
  • Does putting pen to paper make you see things in a new light?
  • What are the steps required to obtain those assets or decrease those liabilities, and are they realistic?
  • Are you willing to work together to achieve these goals?

These are just few questions that can spark an ongoing conversation about goals, values and financial independence. BBH has worked with countless families to educate the next generation. This is just one of many tools and exercises we provide. Please reach out to us for more details.

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