Why You Should Talk to Your Kids About Your Wealth
If you were born during the baby-boom generation, then it is not very likely that your parents shared information with you about their finances. Perhaps, in their final years or when one parent passed away, they might ask for help but the prior generation was fairly tight-lipped about money. That generation lived through the depression, saw what real hard times looked like and knew the importance of having a rainy-day fund. They probably frequently said “we cannot afford that” whether the statement was accurate or not. Psychologically, their feelings about the need for security often made them live below their means.
Today, we can see our wealth in real time. You can wake up and look at your computer and have a accurate idea of what you have. We can run software programs that will simulate our retirement income in good times and bad. We can financially engineer solutions to assure us that we will not run out of money. Despite all these tools, most of us have spent little time training the next generation about money, finances, saving and investing. Our parents did not talk about it with us, but we need to help our kids and we have had some great experiences helping families share their story with the next generation.
Recognize that your money story is about your values. Pick a family event, ideally a summer holiday or down time during family gathering. Hold a family meeting and brainstorm a few questions with your family. Use a whiteboard and collect the answers then synthesize to a short statement. Try asking “what is the mission of this family? What do we value? What makes us unique? What contribution can we make to the world?” You will come out with something like “The Jones family values close bonds between the members, time spent together at the beach and giving back to our local community. We remember the stories of hunger from prior generations and we support the food pantry so other families do not go hungry. Our beach house on Jones point is the gathering place for our family reunions and is integral to keeping our family close.”
When you have your mission statement, you can start explaining to your children and grandchildren your story of how you earned your wealth or preserved what was given to you. Share your mistakes and celebrate your accomplishments. This is your hero’s journey to explain how you got to where you are and what you want your family to do with the abundance that you will leave behind. This is not intended to be lecture time, it’s story time about you, your parents, hardships and lesson learned. Share your passions—if you love helping people anonymously, build a family tradition around that. Every few months, our family will go to a chain restaurant like Chili’s and pick a couple of families out at that we think may be stretching to have a night out, ask the server for their check and slip out unnoticed. We do not know if these families truly need our help, but we have been blessed with good fortune and if they are not in need, then hopefully they will pay it forward.
If you have a complex financial picture and already have done a lot of planning, it can often be beneficial to have a professional help explain the family plan. If you do not want to divulge every asset to your children, you do not have too but they should be made aware of what they might have to confront. They will have a better sense of their obligation to be good stewards, be able to ask themselves how they can respect the family values and learn about the financial structure of the family outside a time of crisis. I always love watching movies where the family goes to the lawyer’s office for the “reading of the will.” It does not really happen how it is portrayed in the movie but there is always a big surprise that no one knew about—and often a fight or outburst over the surprise. The family is being asked to make important decisions at the worst possible moment after a loved one has freshly passed. The reaction to surprises is usually negative and met with questions—”did mom like her better than me? Why didn’t I get the beach house? That’s not fair, I took care of dad when he was sick!” If your intentions are clarified in advance and your reasoning is explained to family members, it can generally reduce conflict at a very stressful time. The family gatherings can be used to explain your intentions, discuss your beliefs about fairness and implement ways for your children to work together and not against each other.
In my next installment, I will discuss the concept of the “Family Bank” and how families with multi-generational wealth use a common fund to support family missions like philanthropy, education, vacation homes and travel.