For some families, talking about money can be like talking about sex: it’s taboo and impolite to discuss openly. Yet avoiding family discussions on financial matters can deprive kids of not only crucial financial skills and awareness, but also an understanding of your family’s attitude toward wealth.
Sarah Bull, a partner and portfolio manager with KJ Harrison Investors, says a don’t-ask-don’t-tell approach to discussing money isn’t healthy. “It’s important for everyone to have a sense of the value of money and an understanding of how it works,” says Bull. “But especially for kids, ongoing conversations about money help foster independence and responsibility.”
Steven Legler agrees. A family legacy guide in Montreal who works with multigenerational families, Legler says the more often a family discusses money and finances openly, the better. “It’s not one 100-minute conversation,” says Legler. “It’s 100 one-minute conversations. If your children ask questions about money and you freeze like a deer in the headlights, they’re going to assume this is an off-limits subject and may shy away from bringing it up again. You risk stunting their growth.”
So, how should you initiate these conversations, and what do kids need to know? Here are four tips on how to talk to your children about wealth.
Start when your kids are young
Bull says you can start talking about the value of money with children as young as 5. She recommends weaving these conversations into everyday activities. She uses the example of grocery shopping with kids and explaining how much items cost and the difference between paying with cash versus a card. These early lessons can lay the groundwork for deeper conversations later in life.
“It’s important for kids to understand your perspective around wealth,” says Bull. “They see you working each day and, of course, it’s to pay the bills, but it’s more than that. You can talk about how working for a living helps with their education and allows them to have experiences. As they get older, you can start sharing what wealth means to you, and what your principles are around that.”
Cover the basics
Legler says by helping kids with real-world money management, such as opening a bank account, deciphering line items on a paycheque and understanding why we pay taxes, parents are laying the foundation for financial independence.
“There’s nothing wrong with striving for more financial literacy,” says Legler. “I’ve seen families where their kid has a summer job for the first time, has to fill out a T4 slip, and hasn’t a clue what it is and what it represents. If everything is taken care of for kids, they won’t know how to do even the basics when they become adults. That’s what you want to avoid.”
Bull is also a strong proponent of kids learning the basics. She believes the key to nurturing kids’ financial independence is building an understanding of what she describes as the five pillars of basic financial management: investing, spending, saving, donating and earning.
Both Bull and Legler point to the “donate” pillar of financial basics as an important component of wealth management. Legler says a great way to connect with your child and share part of your family’s culture of philanthropy is finding charities your child is interested in and supporting them together. “Many families want to impart to their kids that charitable giving is something families of wealth can do and feel good about,” he says.
Normalize conversations about wealth as kids grow up
Legler believes some families shy away from conversations about wealth because they’re reluctant to share what they consider too much information. He suggests these conversations needn’t be about your specific worth, but rather your values around wealth.
“Some families think talking about money means disclosing everything about their estate in one shot. They don’t talk about wealth because they want to avoid a one-time, reveal-everything meeting where they have to divulge how much the family is worth,” says Legler. “You don’t have to talk about whether your family is worth $50 million or $500 million to have useful conversations.”
Share your family’s legacy goals
“Conversations around legacy planning allow you to share your values,” says Bull. Talking about legacy will likely include whom to contact should something happen to you, and sharing lists of bank accounts, financial advisors and who holds power of attorney for health and property. But Bull says discussions about inheritance are also opportunities to share views on wealth dispersal.
Many of the families she works with are not simply passing the entire estate to the children, but leaving large portions to various charities. “Among ultra-high-net-worth individuals, I try to stress the importance of talking to their kids to make sure they don’t assume they will be receiving their entire inheritance,” she says. “The more detail you can communicate, the better the estate planning process goes.”
“It’s never too late to have these conversations,” says Legler. “They really help kids have a realistic outlook on their place in the world.”
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