How to Talk to Your Kids About Money

by Jenny Ling, Esq.

In many families, money and personal finance is not a common discussion – how much you have, how you spend it, how you’re managing it, and what you’re saving for.  But maybe it should be.  According to recent surveys, the majority of parents say they would never disclose their income or their net worth to their children before they turn 18.  Many parents said they would never disclose this information to their kids.

If you aren’t talking to your children about money, could it be because you are not sure where to start? Or perhaps is it that you are concerned that if they know how much money there is, it will make them lazy, unmotivated, or change the course of their life decisions in a negative way?   If you don’t want your kids to worry about how much money is there, could it be that you grew up in a family that never talked about money?

Many of my clients are shocked when we do their Family Wealth Inventory and see the total value of their wealth – life insurance, home equity, retirement plans, brokerage account. Even those who are not wealthy may not want their children to know how much they have.

By leaving children in the dark about money and finances, parents could actually hinder their children’s ability to handle money wisely.  No one wants to raise a “trust fund baby” – even if creating a trust is the best plan for your children’s future, whether they are 6 or 16 or 36.  Those who inherit a substantial amount may be unprepared for what to do with that sudden wealth.  It can affect their relationships or their motivation for work.  Stories of inheritances being channeled into expensive sports cars, lavish vacations, and fast living are all too common.

One goal that almost every parent has for their child is that they will learn to handle money well.  You can talk to your children about money and wealth, at least in generalities.  There is no need to show them bank or financial statements.  Instead of concentrating on money and materials things, talk to them about your values, the opportunities money can provide, and what you want to accomplish with it.

As a parent, getting into conversations about money now, in an age-appropriate way, is a huge opportunity to pass on values and lessons. With young children, talk openly in a natural way. You can start off simple by discussing needs versus wants. Give them physical currency to purchase a small item, such as a beverage and have them bring back change. You can open a savings account for them and talk about goals for the money saved to teach about budgeting. When your children are older, discuss stocks, and maybe buy a small share of something they can relate to, and then review and go over the statements to have an ongoing conversation about it. Also important is discussing credit, and how to use it appropriately to establish healthy financial habits.

Of course, one of the most effective way to teach children about money is to be an example.  Let them see you using your money in a way that reinforces your values.

Remember that discussing money and personal finance with your kids is not the same thing as giving them the money at that moment.  You have the power to create giving and inheritance structures that will support your child’s ambition and your work ethic.  You can structure inherited wealth to promote responsibility and allow access to funds earned in stages, by age, or achievement, or need.

Helping you talk to your kids about money is one of the things we love to do because we see it as a real opportunity for your family to come together and use your whole family wealth to create more connection from one generation to the next.  Remember, estate planning isn’t just about passing on wealth, it’s about passing on values.

Jenny Ling is a partner at the Law Offices of Jenny Ling, PLLC.  She focuses her practices on estate planning, business succession planning, business and bankruptcy.