How to talk to children about wealth

As parents, we often don’t know how to talk to our children about money. For our clients, whether they become wealthy slowly or suddenly, one of the biggest concerns clients share with us, after the need to protect their wealth, is the impact this money will have on their children. How do I keep them motivated and prevent them from becoming materialistic or entitled?

In our experience, money acts as an amplifier: It will turn up the volume on whatever values are already present in your family, healthy or not. Parents can turn up the dial on the healthy values, and foster a healthy relationship between children and family money, by following basic principles:

Be transparent about your wealth.

Determining how much to share about your finances with your children and when to do so can be a tough call. Many high-wealth parents put off having conversations about money. Parents should talk to their children 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 modelled in various age-appropriate ways.

As children get older, clearly communicate expectations about the amount of financial support you will give them. Be specific: You might be willing to cover a used car (but not a new one) How long will you offer support? Until age 25? Age 35?

Some of these decisions might feel arbitrary if you have the means to help a lot. Start by getting a clear vision of the future lifestyle you desire for your children. We are often surprised at how little parents have thought about this question. The lifestyle your children enjoy now is based on your financial success and may not be the lifestyle they are able to achieve when they leave the nest. They need to be prepared for what could be a big lifestyle change as they head out on their own.

Preventing your children from becoming financially dependent requires clarity and intentional communication about your financial contribution to their success versus their own responsibility to the outcome. 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.

Show that work is important.

Helping children understand the importance of work and directing them on a path toward meaningful, useful employment is critical to their long-term happiness, and yours. Launching their children well is one of the biggest worries for high-wealth parents: They fear their own success will negatively influence their children’s ambitions. The fact is, children don’t profit from being handed everything they want. If they don’t have to work for it, they likely won’t.

But work is about more than just preserving the family’s earning power. Freud famously said, “Love and work are the cornerstones of our humanness.” At its core, work gives us a sense of being useful in the world, and without the financial need to work, grown children of high-income parents can drift unhappily through the world without a sense of purpose.

Ask your children about the future they want to achieve. Try asking them:

  • What do you think are the most important things to our family?
  • Why do you think they’re importantWhat do you dream about doing or being in your life?
  • How do you define success in life, work, money?
  • What are you afraid of or worrying about in life, work, money?
  • What subjects, activities, hobbies make you feel most alive? Joyful? Happy?

Having these conversations regularly can empower your child’s decision making and steer them toward satisfying educational and career goals.

Money conversations are often awkward, even (maybe especially) with the people closest to us. But putting them off — or never having them at all — isn’t the answer. Having open, age-appropriate conversations with our children about money is the best way to set them on a path to a fulfilling and secure future.

Source: John Christianson/Harvard Business Review September 2017