When to Communicate About Family Wealth

Do you ever wonder, “When should I begin talking about our family’s wealth with our children?”

What you might not realize is that you have already begun to communicate about your family wealth with the lifestyle decisions you have made thus far – your implicit and explicit comments about money in general, and the actions you take, such as your spending habits or how you approach sharing your time, talent, and treasure with others.

Everyone acknowledges the importance of effective communication. And it is crucial, especially regarding communicating with your Rising Generation about your resources.

Yet, we often find that wealth-holders avoid talking to children and grandchildren about their wealth because they lack the skills to do so; in reality, they fear the implications of their children developing affluenza, feeling entitled, or being taken advantage of by predatory individuals.

However you personally feel about having money conversations within your family, please remember that two way communication is vital to the preparation of the Rising Generation.

Here are a few guidelines that can be used to prepare your family to talk about money:

Don’t talk about the money.
A predominant stumbling block to communication is that wealth-holding parents assume they have to talk about their financial statements. You don’t have to talk about the actual money – the dollars and cents of things – for some time. There is a lot to talk about before you get to the financial statements, including the responsibilities, opportunities, and expectations that come with wealth.

Get clear on your legacy message.
Before you can begin the conversation about your family’s wealth with your children and grandchildren, you need to get the message right. The “message” refers to the shared values, purpose, and expectations of the family. Focusing on this message is important, whether a conversation takes place within the family of origin or with a spouse, significant other, extended family member, or friend. This approach keeps your focus on what’s most important – the values that surround your resources.

Move toward transparency.
The goal is not to keep secrets or deny facts; however, this progression doesn’t have to mean full financial transparency all at once. For example:

1. Personal financial education can begin at a very young age with the help of age-appropriate methods and tools such as piggy banks, allowances, and budgets. For tweens and teens, introduce them to the topics of saving, spending, investing, and giving back. Or, for young adults, begin to educate them on topics such as compounding interest, credit, and saving for retirement.
2. If your estate plan is designed to make money available to your adult children at a certain age, then this upcoming change could be a great opportunity to talk about the respective assets that will be made available to them when they reach that age and how they can prepare to handle any associated roles and responsibilities.
3. As children get closer to marriage, this life transition is another opportunity to talk about the portion of the family wealth that may have an impact on them so that they can factor this knowledge into their planning. In some families, a prenup is required, and all too often, the creation of this document is the first time money is discussed. If the expectation is for the children to have a prenup, then have this discussion prior to the significant other or spouse joining the family, and ensure that the prenuptial conversation is preempted by several conversations about your values and legacy messaging.
4. When adult children are considering starting a business or entering a vocation that doesn’t pay high wages, this provides an opportunity to have a conversation about how they can borrow money from the family wealth or leverage the income from their trusts to help pay for their lifestyle expenses.
5. Another step toward transparency is to share more about your family’s financial landscape – a macro picture of the family’s assets, the legal structures around the assets (e.g. LLC, Investments, Foundation, etc.), and the trusted advisors responsible for guiding the family’s assets without specifying the value of each asset.
6. Finally, some families decide to provide full transparency of their wealth and estate plan once their adult children have displayed responsible handling of the aforementioned steps and completed several major milestones, such as after they graduate college, become established in their careers, and/or have children of their own.