How should we talk to our children about money?
It's a question that weighs heavily on the minds of many parents, and with good reason: The way we communicate with our children about wealth today will shape their financial experiences in the future. Will they enter adulthood confident and prepared to manage the family wealth? Or will they find it a confusing and burdensome process? Much depends upon how you relay information to them about money matters, great and small.
You convey your financial values to your children through your interactions with them, and the financial planning steps you take on their behalf. For example, you may fear that an outright gift or trust fund may negatively impact your child's work ethic or career choices. By setting up a trust that matches a child's income, you can articulate the value you place on work. In this way, your child receives the benefit of the family wealth, as well as an understanding of your feelings about the relationship between work and money.
If you wish to communicate philanthropic values, involving your children in the life of your private family foundation can be an effective approach. When you encourage your children to research recipient organizations and become involved in grant-making decisions, they can witness your enthusiasm about giving and may even develop a philanthropic conscience of their own. Other options include doing volunteer work with your children or simply explaining to them how a charitable donation fits into the broader family plan.
There are also many less structured ways to share financial values with your children. "Can I have another video game?" "Can I drive the new SUV to school?" "Can I have my own credit card?" These types of questions provide an opportunity to share your feelings about displays of wealth and spending decisions. When you provide more than a yes or no answer, your child will begin to understand your feelings about money matters. Certainly not every trip to the store should end with a finance lecture, but these moments do provide an opportunity that shouldn't be overlooked. Of course, the clearer you are about your feelings regarding money, the clearer your message to your child will be.
Finally, consider the way money is discussed in your family. In previous generations, it was taboo to discuss financial matters such as stock market holdings or salaries or inheritances. Today, children are growing up in a world where money is discussed frequently. If there's silence surrounding money matters in your home, it can create confusion. A child who grows up discussing age-appropriate financial matters may be more comfortable with money issues and will be more likely to discuss wealth issues with you in adulthood.
The best way to share your financial values with your children is to communicate early and often, using words as well as financial structures. This will allow your children to better understand your feelings about the relationship between wealth, spending, saving, and giving. An added bonus: your children are more likely to become effective stewards of your family's wealth.
Updated: January 1, 2013
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.