When we speak about money, we often focus on the technical aspects of our financial capabilities, investment portfolios and trusts. But being in touch with our emotional intelligence–specifically how it informs our priorities and decision-making–is equally, if not more, important in realizing true wealth and generating a positive impact for those around us.
The solution to making sound decisions that contribute to you and your family’s financial wellbeing is two-pronged. First, family members should be self-aware emotionally, be empathetic to each other’s needs and consistently communicate with each other–in other words, families must use their emotional intelligence or EQ. Second, balance that with your financial acumen–your IQ–to work toward the future you and your family members want to achieve. This balancing act is all the more important during crises like COVID, when stress levels run high and our finances are less stable. A foundation built on empathy and trust allows us to navigate challenging conversations about money and the unpredictable terrain of today’s circumstances.
Incorporating your emotional intelligence into your mentorship approach means that you’ll be able to help younger generations engage in a way that’s meaningful to them.”
Embrace and Identify Your Emotions
On my podcast, Money Stories with LDT, I speak with inspirational women with established careers, organizations and philanthropic endeavors. Our conversations often center on how they have navigated their personal financial journeys–characterized by a growing sense of their own goals, an awareness of their emotions regarding money and the ability to demonstrate empathy for those around them.
Emotions are complex but also very instructive. Being in tune with them can help us build a deeper sense of purpose into our financial decisions, leading to a greater sense of fulfillment. Understanding and processing emotions can also prevent us from acting rashly, particularly during times of crisis. When times are tough, it is easy to react out of fear or anger–like selling all of your stocks when you find out a global pandemic is coming. When we’re confused or frustrated, many of us tend to ignore certain aspects of our finances rather than face the reality at hand. Leveraging your EQ means that you can create space for these emotions and understand them for what they are, instead of letting your mood drive your actions. Then, bring in your financial knowledge to ensure you’re being as strategic as possible in your decision-making.
By blending these two aspects of your intelligence–emotion-oriented and returns-oriented–you can make more informed and thoughtful decisions about your philanthropic and wealth management goals.
Apply Your EQ and IQ to Family Financial Planning
Your financial EQ matters on a personal level, and it’s even more important when thinking about communication and planning within the family, where everyone tends to bring a different and sometimes competing perspective. I’m a proponent of hosting family meetings, where your financial EQ and IQ will both come into play. Begin these meetings by asking family members, what are each of our core goals when it comes to money? How will we achieve them? Don’t be surprised if everyone isn’t on the same page. Too often, when family members disagree about money, it can grow contentious and uncomfortable. It doesn’t have to be that way; when you leverage your EQ and truly make an effort to understand where each person is coming from, you can better navigate these conversations and help your family find shared ground. Allow ample time for discussion so you can appreciate and actively listen to each other’s perspectives.
Once your family feels aligned on goals, the planning process will become much more enjoyable and effective. In my book, The Business of Family, I highlight how to make a “business” plan that details what a family wants to achieve and how to get to get there. From there, split up the tasks so each member is responsible for a section, be it finding an appropriate investment opportunity or a philanthropic endeavor to participate in.
Provide Empathetic Mentorship
According to research from the Women’s Philanthropy Institute, passing down values like generosity requires intentionality. I often say that we should mentor young family members like we do our employees–meaning it’s important to create a mission statement that they can begin to live by. Weave coaching and mentorship into your family dynamic by helping younger family members understand how money works from an early age.
Teaching children about how the stock market works or how to budget is extremely valuable. But to make a real impact on young people’s lives, you have to understand what their frustrations are, what inspires them and what gets them motivated. That requires empathy. Incorporating your emotional intelligence into your mentorship approach means that you’ll be able to help younger generations engage in a way that’s meaningful to them. If they aren’t “into it” or something isn’t connecting, try to find out why by talking to them about how they’re feeling, rather than getting frustrated or giving up. This applies not only to your family members, but to any and all mentor or advisee relationships.
Building a strong EQ foundation, coupled with financial savviness and know-how, will empower you and your family members to not only be stewards of their own financial success but will also contribute to the positive connection between generations–during times of crisis and beyond.