Many experts, but not all, say that wealthy parents who plan to give substantial sums to their children should talk to them about wealth early – when they’re about six to seven years old.
“Many parents postpone speaking with their children about family wealth for fear that it will rob them of motivation,” Lisa Colletti, director of wealth management and principal at Aspiriant, a wealth management company. “While the concern is understandable, ignoring the topic robs the family of the opportunity to discuss values and long-term financial goals.”
“Speaking to children about wealth can be a double-edged sword...on one hand it makes sense for children over 21 to know where the assets are ‘just in case of a family emergency,’" says Joshua Austin Scheinker , senior vice president of wealth management at Scheinker Investment Partners of Janney Montgomery Scott. “On the other hand, you don't want hard-earned wealth destroyed by irresponsible kids.
Scheinker thinks parents should continuously test their children’s responsibility with money and when they feel comfortable, allow them to manage their wealth.
Tim Shanahan, president and chief investment strategist at Compass Capital, suggests asking your kids, hypothetically, what they would do if they suddenly inherited a large sum of money.
“In our experience, most high-net worth families wait until their children have a college degree under their belt before divulging the specifics,” says Shankar Iyer, a senior vice president and wealth management advisor at Merrill Lynch in Chicago. “Our approach has been to hold a ‘family summit,’ where both parents and children attend to discuss family wealth related values, including philosophies towards philanthropy, investment risk, tax minimization and intra-family gifting.”