7 Tips for Raising Wealthy Kids to Be Socially Responsible

To avoid raising spoiled, entitled kids, some parents clam up about their wealth entirely. That's not the answer. Instead, get talking and teaching and be open about your finances.

How do parents with substantial assets raise fiscally and socially responsible children? How do you talk to your children about the wealth they are likely to inherit?

Many successful people with significant wealth don’t know how to talk to their children about money. Emotions and a willingness to involve your children are often intertwined with estate planning, taxes, philanthropy and legal issues.

This is something I’ve seen firsthand. A very successful retired executive I knew left his kids a detailed note laying out whom to call when he met his demise, which unfortunately happened much sooner than his adult children expected. It included his financial adviser, attorney, CPA and other trusted advisers. While he thought he was being proactive, having a seven-figure portfolio and a list of strangers presented to his heirs (his adult children) at a very emotional time did not have the intended effect.

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While the kids knew that he was successful, they did not know to what extent. The will specified what the children would receive, but they were not prepared for the new wealth. Beyond the obvious emotion caused by his death, now they were left to educate themselves on investments, interview financial professionals and generally navigate this new reality. This no doubt compounded what was already a stressful situation. Instead, he could have initiated a conversation about his wealth, and facilitated introductions between his advisers and his children while he was still alive.

Try these seven tips for talking to your children about both money and the responsibility that comes with it.

1. Start Talking About Money from a Young Age

Not talking about money doesn’t help your kids feel more normal. It actually can make them less prepared for a financially responsible future.

“In the name of not wanting their children to develop a sense of entitlement, parents don’t speak about money,” said Dr. Richard Orlando, founder and CEO of Legacy Capitals, a consultant specializing in family wealth transfer and governance. “As a result, the rising generation won’t be ready to successfully handle their eventual inheritance. They’ll have a sudden-wealth experience, similar to a lottery winner.”

Start talking with your children about money from an early age. A piggy bank for those as young as 5, sectioned into fun items, short-term goals, long-term goals and charity, for example may be a good start. No matter how much wealth your family has, allowances should be limited to a set amount per week, and your child should have to budget . For instance, the Money Savvy piggy bank (www.moneysavvy.com) is divided into spend, save, donate and invest.

2. Teach the Basics

Don’t forget to cover the basics with your children, like how you manage your monthly budget. From an early age, in kitchen table discussions, you need to show your kids how you pay for food, housing, insurance, cars and more. In addition to your own chats, your financial planner, accountant, lawyer or other professional money manager may offer structured guidance and go beyond basic financial education.

3. Encourage Volunteering

Volunteering is important for your child’s financial and overall well-being for two reasons: They’ll learn the importance of charity for others and gratitude for what they have.

But don’t just have them volunteer for one day at a soup kitchen or library or similar. Have them work with an organization with a cause they care about. Search for a local cause or charity they can volunteer with to help their community. Children as young as 12 have created irrigation projects, been mentors to younger children, and have organized fundraising drives at their schools. By being involved in their community, your children will develop a connection to the world and valuable leadership skills.

4. Require Work for Money Given

Requiring your children to work helps them value money. Work doesn’t necessarily mean employment. It can mean doing chores, volunteering or earning grades that lead to merit scholarships. Find the amount of money and hours that fit in your long-term goals for your child’s future.

“It is important that children develop a strong work ethic,” says Dr. Orlando. “But many parents pay for all their child’s needs and wants — well into their 20s and sometimes into their 30s. They then wonder why their children don’t have a job or stick with a job, especially when the job causes inconvenience in their lives.”

5. Take Your Children to Investment Meetings

Because you want your children to take over their own finances at some point, your kids need to see the process of how you handle yours. Take your young teenagers with you to meetings with your financial planner. Encourage them to ask questions about your investments. Push them to ask about how to pay for their college and to explain 529 plans and other college savings plans. Your child might be better off working during college or partially paying for their own education. This is a good time to discuss how much of their education is their own responsibility.

Also, have your children discuss with your financial planner how the income you receive from investments factors into your wealth — and helps pay for expenses such as housing, utilities and their car insurance.

6. Give Older Children Jobs Within Your Company

If you would like your teenage children to one day take over your company, they will have to earn the respect of your employees. Assign them a low-level position in your company, such as working in the mailroom, doing data entry or working on a construction site for several hours per week or more.

Then, add in a mentorship program once per month from you or another member of the management team. Another idea: Arrange shadow time during which your child can follow a senior and/or mid-level executive to see what and how they perform their work. A shadow day can be as little as two hours of your child asking questions to see what their career is like.

7. Write Clear Estate Plans

Instead of just saying your children will have your assets passed down to them no matter what, put conditions on everything from taking over your company to the amount of money they can acquire and at what age. For instance, you could write into your estate plan that before your child can take over your business or inherit money from your estate, they have to work for your company for three years and graduate college.

Your goal should be “to prevent heirs from misusing the grantor’s wealth,” says Dr. Orlando. “Estate plans are over-engineered, resulting in perpetuating the parent-child dynamic from the grave.”


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Chris Creed, CFP®, CPWA®
Senior Lead Adviser, Venturi Wealth Management

Chris Creed is a Senior Lead Adviser for Venturi Wealth Management. Chris partners with new clients to organize, plan and manage all aspects of their family's financial life. As a Certified Financial Planner® professional and a Certified Private Wealth Advisor®, Chris creates customized wealth planning strategies unique to highly affluent clients.