Should You Share Your Financial Situation with Your Children?
Money may well be the last taboo. Many people are very uncomfortable discussing their finances with anyone – even their accountant! Sharing information with your offspring about your finances may be too much for you to handle, especially if you have done very well financially.
However, in my opinion, trying to withhold or shield your children from knowledge of your circumstances is usually impossible and typically unproductive.
Yet, we do – as did our parents and their parents before them. With that long of a non-sharing tradition, why would you want to change?
Can you hide your financial situation?
Assume, for a moment, that your children will receive a substantial inheritance, or perhaps even assets in a trust fund at a certain age. Perhaps you did very well and put together a few million dollars. Perhaps you won the lottery, or perhaps you are in the sept of a wealthy family and you also inherited a lot of money.
You are providing private school for your kids, you live in a nice neighborhood and drive a fairly expensive car. You are able to take vacations whenever you want and you like your children to look nice so you get them designer clothes and accessories.
Do you think your kids won’t figure out that you have money? Do you think they don’t notice the difference between their situation and others around them? Trust me, they will figure out that you are rich and they will wonder why you don’t talk about it with them.
Are you afraid they will get cocky and brag about how rich they are to their friends? Do you fear knowing you (and by extension they) have money will make them lazy do-nothings? If you don’t give them age-appropriate preparation, how will they learn to respond to the world’s reaction to their situation.
Jamie Johnson, of the Johnson & Johnson fortune, discovered that his family was wealthy when a class mate read about it in a book in his school library. He found out at the same time his teacher and peers did. How well do you think he was prepared to answer questions? How well prepared could he have been to respond to teasing, exclusion or other kids wanting to befriend him solely due to his family’s money? You can watch his Born Rich Documentary interviewing his rich peers about their inheritance for more information!
According to the authors of Estate Planning for the Healthy, Wealthy Family: How to Promote Family Harmony, Affirm Your Values, and Protect Your Assets, you can’t keep the knowledge of your wealth from your children, so don’t even try. It advices that you teach them age appropriate ways to handle it. From an early age parents should work to build a trusting relationship with their children and to build competence and confidence in their child around the child’s abilities – not their net worth. When they get to be a teen, you will have grounded them in money concepts and you can begin to show them what it costs to maintain the family lifestyle. You can start to give them an idea – with no specifics – on the level of the family wealth and the fact that they may participate in it in the future. As they continue to grow, you continue to provide opportunities for them to grow their competence and establish their own identity – separate from the money.
Eileen and John Gallo, in Silver Spoon Kids : How Successful Parents Raise Responsible Children , note that being silent about your money doesn’t help your child. It doesn’t help them learn what money is, how to earn it or how to manage it. They too recommend age appropriate training and money talking. They also advise parents to talk to their kids about estate planning. Many parents, they say, fear that telling kids what they will get will remove the kids’ motivation to succeed. These parents are afraid that their kids will turn into lazy, entitled people if they know that they will be getting a sizable amount of money. The Gallo’s response to this is that these parents have a bigger problem than discussing estate plans if their kids are that lacking in work ethics.
They also believe that:
- If your kids do have a trust fund, you should spend time helping them develop a guiding passion in life. Kids need to feel competent.
- If your kids are old enough, you should talk to them before creating a trust fund for them to see what they think and feel about it. Include discussion of any strings you are planning to attach to the money (aka incentives – like finishing school, earning money for x years, being x years old, etc) before getting them money.
- If you are giving annual gifts, be sure and state any expectations you have regarding the money before giving it. Then your child can feel free to not accept if they don’t like the expectations attached.
If you are leaving inheritances, especially unequal ones, letting the children know what they can expect and why you are doing dividing up your money a certain way can help them plan out their own lives better and help them deal with emotional issues around the inheritance while you are still around to help mediate those sibling rivalries. For help in understanding emotional issues around inheritances, check out the book Overcoming the Inheritance Taboo by Steven J. Hendlin, Ph.D.
Sharing your finances with your children, in age appropriate chunks and with your own expectations and money values in place, allows you to prepare them better to deal with money (or lack thereof); opens the door for you to teach them great money management concepts and investing techniques; and puts a spotlight of sunshine on a mostly still taboo subject.
Even if you aren’t rich, sharing information at the right ages about finances can help you teach your child good financial habits and help them understand why you may or may not be willing to do or buy certain things at certain times.
Did your parents share any information with you about household finances? How did they do that? What do you plan to share with your children – and at what ages?
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