If families don't talk about the origins of their wealth – and what it means – to their next generation, a golden opportunity to right-size expectations is missed. Communicating to your children about wealth is the chance to bridge how to appreciate, respect and normalize what might be intimidating, uncomfortable or awkward. Many beneficiaries desire to live up to their family's expectations but may not know how.
Two common fears come up when preparing to reveal the magnitude of family wealth to the next generation. First, families are afraid of disincentivizing children, or seeding lazy, recalcitrant, and/or entitled heirs. Second, they fear delaying the news, only for their children to read misinformation from the internet or hear from a classmate or outsider about the family's wealth or business. You can calm these fears by telling the real narrative of the family's success over time, peeling back the story in layers like an onion and educating beneficiaries with the skills and knowledge to become good stewards.
So, how can we confront the elephant in the room, when it comes to sharing more about the wealth in your family? To follow are 6 tips on preparing your progeny to be great stewards.
- Messaging: Start by exploring your own feelings and bias around wealth. What messages did you receive or experience when it comes to history of your family's wealth or business? Which stories and values around the wealth do you want to pass along (or not)? Consider articulating your money philosophy or talking to your spouse or partner about their money mantra before approaching your children. Have a solid understanding of where parents or guardians are aligned, and where they are different, before talking to your children about your values around wealth.
- Modeling: Children are sponges. They absorb a lot from what is modeled to them. If you are an “immigrant” to wealth and business success, understand that your child might be a “native” and not understand why elders or you save tinfoil, reuse wrapping paper, or hold on to twist ties and rubber bands. If you can explain how and what you model to your children, they can understand how they are different and may not have had to overcome the hurdles and obstacles you have in your life. By modeling how you prepare, plan, and make good financial decisions, your children are learning by your example. Similarly, if you normalize talking about your goals and how financial means factor into achieving them, you can help your children respect what being part of a family with wealth or businesses means. Third, model how to build self-esteem not from material effects, rather from life experiences, building knowledge, and meaningful relationships.
- Molding: Wealth education typically begins informally with financial parenting. Consider starting small, at age-appropriate opportunities, using normal experiences such as filling up a car with gas or shopping for necessities. This brings a hands-on understanding of the cost of food staples to gasoline to start conversations around money. Ask children to add up how many times you fill up your tank a month to appreciate how this impacts your family budget. High school or college-age children will appreciate understanding about working, housing, income and making purchases such as buying a car or home. How do you get a mortgage or car loan? What level of income is required when making larger purchases? Why is it important to live within your means? These are all critical building steps towards their financial independence and autonomy.
- Mentoring: Mentors can be powerful influencers in the development of a child. Recognize the adults who interact with your child frequently, who they look up to or admire and why. Sometimes these individuals are family friends, soccer coaches, advisors, schoolteachers, community members or spiritual leaders. Talk to your child about the mentors they gravitate towards, what they hope to learn, and how these individuals can help them reach their goals. Hiring professional life, executive or career coaches can inspire your child to commit to their personal and professional development if they are having difficulties finding a mentor.
- Manifesting: When it comes to revealing more about the family's business or wealth, consider having family elders share their personal story, their role and involvement. First, share about the hard times, failures, as well as the successes, as often wealth “natives” only perceive the success of a wealth creator. Second, bridge past success to opportunities for family to grow, develop, and learn through applied opportunities such as internships or part-time work experience. Third, explain the family's reward system to recognize, validate and celebrate achievements made by family members. Incentivize gaining financial skills like reading investment statements and financial statements, as a pathway to become eligible to join a board or committee. Often family members need to understand the basic family governance that will allow them to progress and be eligible possibly to work in the family business or in the family office.
- Measuring: How do we know if our children will be good stewards of wealth? Don't leave their success up to chance. Determine family learning goals and milestones for each child individually. Involve your child as they reach adulthood to identify their personal learning goals as it relates to your family's business or wealth. Help them understand how to advance and gain meaningful experience to progress either into a family business, as a beneficial owner, or in their own career. Identifying metrics such as being able to understand the terms of their trusts, how distributions are made, how to work with an advisor, how to read an investment statement, or analyze a financial statement are typically key criteria to being a responsible steward.
Communicating about your family's business and wealth will help prepare your child to appreciate the tremendous head start that being a part of your family provides and inspire them to excel and be the best at what they are most passionate about. There is no greater satisfaction than watching a child succeed. Strong communication, education and preparation are all keys to their long-term success.
Kirby Rosplock, PhD. is the Chief Learning Officer and Founder of Tamarind Learning