50% of High-Net-Worth Families Have Not Disclosed Wealth to Their Children
A September 2016 article in the Harvard Business Review notes that over 50% of high-net-worth families have not told their children about their wealth.
Why is it hard to talk to our children about our wealth?
I remember when my son was in high school. He took a personal finance class, and he asked innocently but point blank, “How much money do you make?” I danced. I dodged.
Yet the Harvard Business Review article on talking to kids about money correctly notes that, in order to have children who are financially healthy, we need to demonstrate vulnerability. In the early years, the discussions are more basic, writes John Christianson:
Parents should talk to their kids about family values and beliefs around money during their formative years — in an age-appropriate way. Frugality, budgets, saving, generosity, use of debt, and entrepreneurialism are all examples of money values that can be discussed and modeled in various age-appropriate ways.
On the other hand, as children mature into adults, the lack of vulnerability can create false expectations and even resentment. I’ve worked with a family where the children had a pretty good idea of the overall net worth of their parents, but specifics were never discussed. Even worse, the parents had made financial gifts to their children that allowed them to live quite well. But because they’d never discussed specifics, the children, without articulating it, began to expect more. The vague knowledge of their parents’ net worth—coupled with their similarly vague expectation—created an uneasiness and tension that led to squabbling and comparison.
As the Christianson aptly states in his Harvard Business Review article,
The key is establishing clear financial boundaries and limiting the safety net before emotions run high. An unlimited financial safety net can stifle a child’s ability to build character and self-confidence while learning important life lessons by overcoming difficult situations. Your emotional support can be limitless, but your financial support should not.
Clarity around financial conversations will undoubtedly produce the best fruit in our children.
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Published February 12, 2018
Topics: Estate Planning