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When And How To Tell Your Children About Wealth?
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For Your Life March 16, 2022

When and How to Tell Your Children About Wealth?

There’s an abundance of places parents can go for guidance on how to educate children about important topics. However, there is shortage when it comes to when and how to teach young family members about wealth. In fact, recent surveys have found that parents find it easier to talk about drugs than money, which is unfortunate as teaching your children to manage the benefits and challenges of wealth may be the most valuable inheritance a parent can provide.

As we approach the largest transition of wealth in history from baby boomers to millennials (an estimated $68 trillion will pass by 2030), more people than ever are seeking guidance on how to teach their family about wealth. Here are some fundamentals to consider:

When?

  • Wealthy parents often struggle with the fear that informing their child of their wealth will lead to a sense of entitlement and lack of motivation. As a result, delivering the message is avoided for as long as possible.
  • There is no ideal age for the wealth discussion. As a parent, you will have to gauge your child’s maturity to determine when to broach the topic. Explaining that wealth is earned through hard work, dedication and, oftentimes, struggle may be useful in promoting core character traits found in those who are successful in their endeavors.
  • As children age and are able to have more sophisticated conversations on wealth, unique experiences like foreign travel or high-end gifts should come with an explanation of the importance of appreciating what one has and how important it is to not take things for granted.

How?

  • Start by making a list of skills that you want to explain and at what specified ages to begin the dialogue (e.g. how to save, how to spend, how to budget, how to invest, how to borrow, needs vs. wants, lifestyle vs. aspirations, and more).
  • As your children age and begin to consider their academic and professional paths, family wealth can allow for older children to focus on their passion and self-worth; rather than strictly their earning potential.
  • As children mature, parents typically remain essential role models and teachers; However, you may also want to include advice from other parties and subject matter experts, such as financial professionals, attorneys, trustees, etc. These parties allow for objective input and a profound understanding of collaboration, teamwork and accountability.
  • Scheduling family meetings may be a good way to allocate responsibility without overwhelming your children. These meetings allow for character building, meaningful communication, and engagement, which can lead to a more thorough understanding of wealth accumulation and preservation. Moreover, involving your younger family members can help shape family traditions and create a cross-generational dialogue.
  • Lastly, establishing private foundations can be an excellent, tax-efficient way for wealthy families to give back to causes that are important to them, while giving the younger generation the opportunity to manage the day-to-day operations of the foundation. Creating a private foundation can link a family’s name to charitable efforts, pass values and skills onto the next generation, and create a wonderful legacy. A private foundation provides for more flexibility, allowing the family to contribute to niche charitable initiatives, in addition to traditional 501(c)(3) charities.

It is never too soon to begin the process of teaching your younger family members about the responsibilities and opportunities that come with wealth. 

 

This article was written by Jason Katz from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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