Children and the Money Talk

When children are empowered with the knowledge and resources necessary to responsibly handle a significant inheritance, they are more likely to have a healthy relationship with wealth in the future. With the proper guidance, children can learn about the responsibilities, opportunities and challenges associated with wealth and use it as a tool for positive change.

Generally, those inheriting wealth fall into one of two camps—either they feel grounded and financially empowered, or they experience low self-esteem and guilt over receiving funds passed on to them from previous generations. But there are several steps you can take to help ensure the wealth you’ve protected will both endure and be used wisely by generations to come. Among these first steps are getting organized and having certain vital documents in place, setting the stage for frank, organic conversations with your children and involving them at the start of the financial decision-making process.

Estate Planning

Documenting your decisions about how your portfolio should be managed, as well as who will receive your assets and in what manner, is important when drafting a trust or will. Creating a trust may bring comfort in knowing that your children and grandchildren will benefit from a properly managed inheritance and that their assets will continue to be used in a way that reflects your values.

Communication

Equally as important is communicating the details of your estate plan to your children and periodically revising those documents as circumstances change (e.g., due to marriages, births, illnesses or a changing economy).

When you communicate with your children about their values and expectations for the family nest egg, children are more likely to be prepared when they receive it and may also better understand your motivations. Plus, you are more likely to feel assured that your legacy will live on as your children and other beneficiaries learn to invest money and make contributions to society via philanthropic giving.

Hosting regular family meetings provides a space where your closest loved ones can share both expectations and concerns, discuss issues, and reach agreements together. Some families even go as far as developing a family "mission statement" that outlines shared values and determines common objectives. 

Financial Decision-Making

Providing children with safe, hands-on money management experience at an early age teaches them to prioritize and make SMART (specific, measurable, achievable, realistic and time-bound) goals. Further, allowing children to actively take part in making decisions about investments and philanthropic endeavors instills a sense of responsibility and ownership in the process and decisions that are made. When the time comes, these traits may help prepare them to manage the family legacy intelligently and responsibly.

The good news is that the task of transferring wealth from one generation to the next can be made easier by implementing collaborative planning and opening channels of communication. The sooner you have the “Money Talk" with your children, the better it may be for both your future and theirs.