Discussing money used to be one of the taboo topics of polite society, along with religion and politics. Unfortunately, many wealthy parents won't even discuss money with their kids, leaving them ill-equipped to handle finances and the emotions that often come with inheriting wealth.
One survey, by SEI Private Wealth Management, showed that about a third of families with more than $20 million had discussed money with their children by the time they turned 21. Only 16 percent discussed it before their children were 16.
The fears are understandable. Kids are surrounded by images of wealth -- take a look at most of the reality television shows on Bravo or any of the popular teen series like "Gossip Girl" for proof that Hollywood's version of wealth means it's normal to carry a stylish purse that costs as much as a good used car.
But no matter how much money you plan to leave your children, "the talk" is critical. Jill Shipley, director of next generation education for GenSpring Family Offices, says the biggest fear wealthy families have is that their kids will feel "entitled to the wealth, becoming spoiled, unmotivated and isolated by envious peers … or that it will trigger conflict, such as sibling rivalry, years before the estate plan is even relevant."
But most often it's not talking about money that makes these fears come true. Shipley counsels clients to remember that communicating about money is not a one-time event but an ongoing process. She recommends starting with a discussion about what the money means to the family and how it ties in with its values and history. From there, take advantage of both formal and informal teachable moments. A couple of informal examples, she says, include:
- At the ATM, or during a trip to the mall, talk to kids about responsible use of cash and credit.
- While watching television, discuss the stereotype of wealth depicted in some of the popular shows and how your family's values differ.
- Spend a Saturday at the local food bank to reinforce the obligation the fortunate have to give to those who are less fortunate.
The more formal teaching methods should focus on kids becoming competent in these key areas, Shipley says:
- Personal money management.
- Wealth preservation (such as insurance, trusts, estate planning, prenuptial agreements).
- Personal and professional development.
- Philanthropy and decision-making about the family's wealth.
Shipley says most kids already know if their families are wealthy and are typically concerned with what it means for them. "However, contrary to many parents' fears, most children do not immediately jump to the conclusion that they don't need to work, and, in fact, they are intently interested in the expectations that their parents have for them and for the money that they will receive," she says. "They are also genuinely interested in learning about the money."
At what age did you begin teaching your children about money and what methods worked the best?
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