Kids and wealth
How to speak fearlessly and openly with kids about wealth
Most of us learn formative lessons about how to spend, save, invest and give as children and teenagers. In some families, parents, grandparents and other well-meaning adults offer advice, anecdotes and admonitions about what to do — and often what not to do — with money on a regular basis. In other families, no one talks about money, ever. Either way, children absorb both explicit and unintentional messages, which form the basis of a lifelong relationship with wealth.
Let’s Talk About Wealth
“Mooooooom, why won’t you buy me this awesome plastic toy (that I just fell in love with two minutes ago)?” Many kids’ first money questions are relatively easy to answer, and in answering, there are three primary goals — to teach delayed gratification, responsibility and autonomy. Together, these skills form the basis for prudent financial decision making. For young children, delayed gratification, meaning the ability to resist temptation, comes in small doses. These small lessons can be woven into everyday conversations that start at a young age and gradually become more substantial over time.
Older children, too, are often curious about their parents’ decisions — and their mistakes! When they ask questions about your behavior, seize the chance to talk about why you spend, save and give in the way that you do, even perhaps reflecting on some decisions that you wish you had made differently. The “why” behind each decision is a window into how your values drive actions.
While starting conversations about money at an early age and continuing to have age-appropriate discussions are critical, you are not required to answer all the questions your children ask. In fact, you should not answer all the questions! As kids become cognizant of wealth and what it means, they might ask questions like: how much money do we have, how much money do you make, how much money are you going to give me, etc. These are not questions that most parents will want to answer until much later.
Understanding your limits in conversations about wealth can provide a sense of comfort as you wade into mature and complex subject matter. Consider what you want to share now, later and perhaps, much later. In response to questions that reach beyond your boundaries, ask why your kids are curious. Sometimes it’s not what you think: Perhaps a friend’s parent just lost a job or must downsize their house. A possible response is, “That’s an interesting question. Why are you asking?” or “I am curious about why you think knowing this information is important.” Using a tough question as a jumping-off point for a conversation might lead to learning more about their thought process.
For teenagers and young adults, it’s important to explain why you’re not ready to share in order to show that the lack of response does not imply a lack of trust or affection. While you might trust your accomplished 20-something child to understand the big picture, putting large dollar amounts into perspective requires an understanding of the family’s wealth values, a robust financial education and maturity – and these things take time. It is appropriate to tell older children that you intend to share more information with them in the future, but you are working through a process to ensure that it is the right time for them and for you.
Who Tells Your Story?
Misinformation is almost always a bad idea — not only because it erodes trust, but also because kids are excellent detectives! There is an entire internet packed full of personal financial information for inquiring minds to access. If a child asks a question that she can find the answer to online, it is best that she hear it from you.
Private business owners often run into this issue. The sale of the company can impact the family’s identity in the community as well as its finances, and sharing age-appropriate information about the decision and the sale process can help kids put the transaction in perspective. These decisions are linked to family values and legacy, which parents can use to educate the next generation about what is most important to them. In addition, without enough information, kids might assume that the entire purchase price will land directly in the family’s bank account, which is rarely true. Share information about any proceeds that were reinvested in the resulting business, will be invested in a new venture or used to fund a charitable vehicle, and why.
Too little information can sometimes be as damaging as too much information. When the information is public, your job is to control the narrative. Don’t let the gossip mill get ahead of you.
Adrienne M. Penta is Executive Director of the Brown Brothers Harriman Center for Women & Wealth