Successfully preparing your children for wealth is a lifelong endeavor, not a short-term undertaking, and should be an ongoing conversation.

An important and continual topic is how families educate and guide children and young adults on what they may inherit, and about the associated responsibilities. To discuss these matters today is Adrienne Penta. Penta is managing director of Brown Brothers Harriman’s Center for Women & Wealth, part of Brown Brothers Harriman. The editors are pleased to share these insights; the usual editorial disclaimers apply. Jump into the conversation! Email tom.burroughes@wealthbriefing.com

The money messages and lessons we hear as children and young adults, as well as the behavior we witness within our own families and communities, influence our life-long decisions about how to spend, save, invest, and give. As parents, both our words and actions have an impact on creating thoughtful and responsible adults who understand how to make good decisions about their wealth. We have helped countless families develop a plan for navigating complex conversations and issues related to wealth as they raise their children. Here are some of the strategies we have found to be most helpful. 

Start the conversation early and often
“Little kids have little problems. Big kids have big problems.” Every new parent hears this advice from tired veteran parents. This advice is also applicable to conversations about money. Little kids have little questions that are relatively easy to answer, and in answering, parents and other caregivers have three primary goals – to teach delayed gratification, responsibility, and autonomy. Together, these skills form the basis for prudent financial decision-making. For young children, delayed gratification, meaning the ability to resist temptation, making responsible choices, and independent decision-making, comes in small doses. These small lessons can be woven into everyday conversations starting at a young age. 

In middle school and high school, kids often begin to understand disparity in wealth and might ask questions like “Is this vacation expensive?” or “Are we rich?” As they mature, parents can share more. For example, it might be useful to explain that a vacation is expensive, but for our family to be together and have experiences outdoors or in other cultures is important to us, so we prioritize taking nice trips together during school breaks. Not talking about the expensive vacation (or car, home, etc.) doesn’t make it invisible, and probably results in misguided assumptions.

For older children, it is never too late to initiate conversations about spending and saving decisions. In fact, the decisions that confront older kids are a training ground for future financial decisions. Don’t pass up opportunities for bigger discussions, like what to do with a first paycheck or how to use a credit card responsibly. Children are often curious about their parents’ decisions – and mistakes! When they ask questions about your behavior, seize the chance to talk about why you spend, save, and give in the way that you do, even perhaps reflecting on some decisions that you wish you had made differently.

Be prepared – not scared – when it comes to the hard questions
Hard questions about money can be daunting! However, they also provide a window into a child’s thought process. While talking about money is often taboo for adults, it is not for kids. They are likely to have conversations around the lunchroom table, and they might not be able to digest or fully understand some of what they hear. Older kids, especially those going away to school, might have insight into what their peers have and how they live differently.

Again, a possible response is “Interesting question. Why are you asking?” or “I am curious about why you think knowing this information is important.” Using a tough question as a jumping-off point for a conversation might lead to learning more about their thought process or a decision they are contemplating.

It is okay, and even helpful at times, to admit that you are uncomfortable and don’t have all the answers. For example: “Dad and I are so lucky and have obviously been able to earn significant wealth. We didn’t grow up with wealth, and we are still working though the decisions about how much to give away, spend, and share.” With tough questions, the key is not to shut your child down – it’s normal and healthy for kids to be curious – but to be transparent about why you are or are not answering the questions.

For young adults, 20- or 30-somethings who might be planning their own families soon, these questions might indicate that they are grappling with their own financial future. Parental decisions about wealth have a real impact in this phase of life, and parents should strive for transparency. Wealthy families cover the spectrum in how they choose to benefit adult children – from giving them nothing beyond a good education to allowing them to access very substantial wealth. For most, the answer lies somewhere between these options: paying grandchildren’s tuition, helping with a down payment, or providing startup capital for an entrepreneurial endeavor. Whatever your decision – and it is a deeply personal decision – be clear in your intention. Don’t create false tests or hold the decision hostage until the right time.

Remain transparent to maintain trust
The 17th time your child asks how much money you have, you will be tempted to give in and make up some fictional number simply to get him or her to stop the badgering. Instead, take a deep breath and resist the impulse to lie. Misinformation is almost always a bad idea – not only because it erodes trust, but in many cases, our kids are excellent detectives.

The internet is full of personal financial information for inquiring minds. Refusing to share or discuss information that children might already know through other means will cause them to seek answers elsewhere.

If a child asks a question they can find the answer to some other place, it is best to hear it from you, even though it might be a challenging conversation to navigate. Private business owners often run into this issue. For example, a family with children in high school sold the family business for a considerable sum. They shied away from sharing the news with their children for good reasons – they did not want them to feel entitled to the money or less motivated to excel. When the sale was announced publicly, the very knowledgeable friends of these teenagers enthusiastically shared the news. Instead of feeling excited about the family’s newfound wealth, these young people were overcome with worry: Their parents would be unemployed! They did not have enough information to fully appreciate the economic consequences of the sale of the family business.

For business owners, the sale of the company can impact the family’s identity in the community as well as its financial position, and sharing age-appropriate information about the decision and the sale process can help kids put the transaction in perspective. 

Too little information can sometimes be as damaging as too much information. When the information is public, your job is to control the narrative – don’t let the gossip mill get ahead of you.

One final note: It is never too late to start these discussions! Successfully preparing your children for wealth is a lifelong endeavor, not a short-term undertaking, and should be an ongoing conversation. The conversation starts with values, which can then serve as a north star for a family’s financial plan, including allowances for children, estate planning, and philanthropy.

About the author
Adrienne Penta is the executive director of the BBH Center for Women & Wealth (CW&W). She led the creation of the CW&W, which supports women as they create and manage wealth and seeks to create a dynamic and inclusive environment where women can engage in conversations about wealth, family, and values. She also oversees private banking marketing and sales enablement. Prior to joining the firm in 2008, Penta practiced at the law firm of Choate, Hall & Stewart LLP in Boston.

Penta serves on several boards, including New America’s Better Life Lab Advisory Council, Women’s Philanthropy Institute at the Lilly School of Philanthropy Advisory Board, the Massachusetts Women’s Forum Board of Directors and the Boys and Girls Club of Boston (BGCB) Board of Trustees. She is a past chair of the Boston Foundation Professional Advisors Committee and past member of the Winsor School Board of Trustees.

Disclaimer
The views and opinions expressed are for informational purposes only and do not constitute investment advice and are not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Views and opinions are current as of the date of the publication and may be subject to change.