For most parents, the idea of discussing the family’s money and wealth with their children has long been seen as a taboo subject. In many ways, this taboo crosses socioeconomic boundaries. High-income and low-income families alike are often reluctant to discuss the home’s finances with their children for a number of reasons. Parents might tell themselves that talking about money will invite their children to pass judgment on themselves or others, or that they will go on to discuss private information with others in ways that are inappropriate.
While these challenges are real, it is perhaps more important than ever for families to treat discussions of their finances as an integral part of educating their children.
The reality is that discussing wealth with your children early on should be viewed as a pathway toward self-sufficiency and responsible stewardship of the family’s future financial legacy. Introducing money concepts to kids as early as ages 3 or 4 teaches them that the things they want or need don’t just appear and lays the foundation for goal-setting. As children get older, the conversations should evolve to teach about saving, budgeting and, eventually, your family’s wealth.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Being a good role model for your kids
Rather than sharing specific details like bank account statements or values of family assets, these conversations should center around more qualitative concepts about wealth — how it was earned, how it is managed, how it is used and what it provides. As a parent, it’s important to remind yourself to set a good precedent for responsible money management — kids pay more attention to this than we often realize.
Early discussions and education about wealth have the added benefit of giving children much-needed vocabulary and context, furthering their understanding of important concepts and creating pathways for open discussions in the future. In these conversations, financial advisors can play an essential role by serving as an expert source of information and backstop for parents who may be uncertain about specific topics. They can also guide conversations toward meaningful points of discussion — for example, focusing on the importance of planning, budgeting and expense tracking. Ideally, advisors have built deep personal relationships with families and will often be best suited to tailoring discussions on wealth within age- and situation-appropriate contexts.
For older children, honest conversations about money, family governance and estate planning should extend to granular details. Clarifying expectations, such as their responsibilities within the family estate and the level of financial support they can expect, ensures a shared vision. In the era of widespread digital communication, it’s also critical for parents to teach their children about the importance of keeping information private.
Acknowledging the challenge can make the conversation easier
Money discussions can often be uncomfortable, but done properly, they can be a good thing. Verbally acknowledging the challenge of discussing money openly creates a space for children to express concerns and ask questions they might otherwise be afraid to voice. Not only do these conversations have a practical value in terms of teaching about managing the family’s finances, but they also foster emotional intelligence and empathy and strengthen connections between family members by focusing on a shared goal.
Open communication about wealth fosters trust and transparency within the family. Children who are included in discussions are more likely to develop a sense of trust and ownership in their family's financial decisions from an early age. Because these skills aren’t taught in schools, and because each family should have a governance structure unique to its members and goals, it falls on families to be the driving force behind educating their children about the importance of this topic.
Parents don’t have to have these conversations alone. Financial advisors can play a crucial role in assisting families to navigate discussions about wealth and can provide parents with insights on how to build the practical skills needed to manage it. Advisors can collaborate with families to develop personalized education sessions that combine the qualitative aspects of this discussion with quantitative data about the family’s financial state and goals.
How to alleviate the pressure
This holistic approach to wealth management empowers children with an understanding of their own family’s values and the practical skills needed to make well-informed decisions. Financial advisors can also position themselves as a neutral, professional third party and arbiter of discussion amid any discomfort families may feel in discussing what is often seen as a sensitive subject, alleviating the pressure on parents to know the answers to the myriad questions that often permeate these discussions.
The journey toward open family wealth conversations is a journey toward resilience. Bringing children into these discussions early on communicates trust and helps them understand the family’s shared values and goals. These conversations provide an outlet for children to ask questions that may be uncomfortable at times and ultimately provide a more accurate and reliable picture of family wealth than what they may receive from outside sources.
Critically, when parents forge that connection early on, children will better understand how and why it is inappropriate to discuss details of family wealth with others. Embracing discomfort, clarifying expectations and empowering children through financial education lay the foundation for a generation that views wealth as a means of building a meaningful and self-sufficient legacy.
Related Content
-
UnitedHealth Stock Falls as Lawmakers Eye Insurers, PBMsUnitedHealth stock is continuing to fall Thursday after the introduction of bipartisan legislation targeting PBMs and healthcare giants. Here's what to know.
-
Here's How Collectibles Are TaxedCollectibles Gains on collectibles can be subject to a higher rate than for most other investments.
-
Three Possible Tax Impacts for Retirees Under TrumpHow might a second Trump term affect your tax bill in retirement — or the inheritance tax bill for your heirs? This pro has three predictions.
-
What to Know About Leverage and Bitcoin's Meteoric RiseLeverage in the financial world can lead to astonishing success or a crushing collapse. How are investors using leverage to invest in bitcoin?
-
How Do You Know When It's Time to Change Financial Advisers?Sometimes a breakup is for the best. Here's how to handle 'the talk' and make the switch to a new professional who's a better fit for you.
-
The Best Ways to Use Your Year-End Bonus (and the Worst)'National Lampoon's Christmas Vacation' shouldn't be anyone's go-to for financial advice, but it does remind us how not to spend a holiday bonus.
-
LLCs: Power Tools That Can Create Big ProblemsForming an LLC for your business might seem like a straightforward endeavor, but if you don't know exactly what you're doing, trouble could follow.
-
Never Talk About Money? For Women, That Can Spell DisasterHow can you plan for retirement when your husband holds the purse strings and talking about money is taboo? Help is at hand for this common problem for women.
-
How Combining Your Home Equity and IRA Can Supercharge Your RetirementWhile many retirees own an IRA and a home, very few are considering how they could work together in a plan for retirement income.
-
The Six Estate Planning Steps Every Blended Family Must TakeWhether your blended family is newly formed or fully fledged, use these six steps to review your estate plans now and lower the risk of conflict in the future.
