Having the “money talk”: Strategies to set yourself, and your children, up for success and happiness

While facilitating a recent family meeting, I asked each member of the family to write down the first word or words that came to mind when they think about money. The collection of words included “opportunity,” “stress,” “freedom,” and “pure evil.”

Wow, that covered a lot of ground.

However, it should come as no surprise. Miscommunication and anxieties about money, especially within a family, can be huge. Across generations, many people worry that talking about money will become too emotional. Others fear that it is tacky. Some are embarrassed that they might not have all the answers to inevitable questions. When it comes to families of significant wealth, the reality is conversations about money are imperative to build the kind of legacy and trust amongst family members that are needed to keep the family, and its desired legacy, intact. The alternative can be devastating to the family’s wealth … and more importantly, relationships with one another.

Over the last decade of working with families, I have come across many different cultures, values, and priorities, but some overarching themes and questions typically arise. Below are five common questions and best practices for you to consider:

1. How and when should I talk to my kids about our wealth?

Among families with significant assets, I often hear fears about mismanagement, entitlement, and the expectations that can accompany wealth. These concerns make sense, and we’ve all heard stories of how wealth can lead individuals down unhealthy paths, but it is important to not let these fears cause paralysis. I once worked with a couple who were terrified of talking to their two children about a large inflow of money from a recent business sale. They were worried the wealth would make them lazy and jeopardize their friendships and relationships. As I questioned them further, they admitted this may be an unfounded fear since their children were a successful lawyer and fashion designer in their 40s, both in healthy relationships. What the parents did not realize was that completely avoiding the conversation was causing anxiety for their children. The children knew something had shifted within the family and were hurt by what they perceived as their parents’ lack of trust in them. After finally having “the money talk,” the kids showed pride in their parents and what they accomplished. They felt respected as being confidants to this important information. This conversation also opened up new opportunities for the family to collaborate, give back, and plan for future generations.

Whether or not our anxieties around money are rational, the only way to address them is to have open and honest conversations with everyone involved. Below are five suggestions on how and when to begin these important conversations.

  • 1. Begin with your intentions. Before focusing on your kids, reflect on your own relationship with money, your goals for your legacy, and the purpose of passing down wealth to the next generation. Remember that miscommunication is one of the leading reasons that wealth transfers fail at each generation. Be clear about your intentions and convey them openly.
  • 2. Put money in its place. It’s easy to get caught up in the pursuit and enjoyment of wealth, but it’s dangerous when personal fulfillment and happiness become synonymous with wealth. Money is a tool, not your identity. This framework is especially important for young people as they are figuring out their sense of self and purpose. Put as much emphasis and importance on other types of wealth, such as social, intellectual, spiritual, and human capital.
  • 3. Start young and discuss often (but not too often). Money plays a fundamental role in all our lives, whether through scarcity or abundance. When it comes to teaching our children about money, we should attempt to normalize money, and stress that it’s not something to be ashamed of … or be overly proud of. Find those opportune moments to discuss money with your children, whether it’s getting their opinion on a new car, home appliance, or vacation destination. Be careful not to make it seem like money is the only factor in making decisions. Remember to have conversations about money like everything else, in moderation.
  • 4. Numbers mean nothing without a sense of scale. One of the most common questions I get asked is when to tell children about the full scope of family wealth. While the “right age” is difficult to target, it is best to wait until there is an understanding of opportunity costs and the difference in purchasing power between $100,000 and $1 million, for example. The goal of full transparency over time is best since it decreases the chances of miscommunication or resentment between generations. However, it’s OK to be vague with numbers until you feel that your kids understand the true cost of living and the purpose of wealth.
  • 5. Practice extreme empathy. It is common to see “teams” emerge within families, especially among different generations. Perhaps the parents are frustrated that their kids do not have the same work ethic in terms of building their own wealth, while the kids are confused and annoyed that their parents don’t slow down and enjoy life more. This is natural. Conversations and decisions are best started on common ground, so try to put yourself in the other family members’ shoes. Even a small shift in perspective can lead to less combative and heated conversations.

2. How Do I Prepare My Kids For Their Future Roles And Responsibilities?

3. How Do I Keep My Kids Safe And Grounded?

4. How Do I Teach My Kids To Be Financially Literate?

5. How Do I Encourage Generosity And Compassion In My Kids?

To explore how best to begin the “money talk” with your family, please contact Whitney Webb. Visit Cresset’s website for additional resources related to financial literacy.

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About Cresset

Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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