Your clients talk to you about money. But the conversation might end there. “Why don’t people talk about money with their kids?” I’ve been posing this question to all kinds of people and was surprised to find how the answers differ by net worth.
Low-income clients have two main responses. The first is a sense of shame. They may feel that they haven’t managed their money well or that their decision-making was poor. Talking openly about their money choices can be too vulnerable. On the other hand, low-income clients who have bought a home, have a cash reserve or saved for retirement fear being asked for money. They don’t want to become the community “bank.” If relatives learn they have savings, they may face intense social pressure to share them. In A Framework for Understanding Poverty (2005, 4th edition), Ruby Payne wrote that, “One of the hidden rules of poverty is that any extra money is shared.”
Business owners and corporate managers may hesitate to discuss money out of guilt. Not guilty that they don’t have enough money, but that they spend so much time working and achieving that they don’t spend enough time with their children. Talking about money may force them to acknowledge that they pursue success more than they seek a healthy work-life balance. Another factor is that they don’t want to spoil their kids. They sense a risk that if their children know about the family’s assets, they may be less motivated to work and realize their potential. On the “Earn Your Leisure” podcast in 2021, Shaquille O’Neal shared that he says to his children, “We ain’t rich. I’m rich.”
Some wealthy parents also have concerns about spoiling their children or creating “trust fund babies” if they anticipate a large personal inheritance. In addition, wealthy families often have an outsized desire for privacy—perhaps to avoid unwanted requests for money and the mental toll of sorting through these demands.
Results of Non-Communication
So, what happens when our clients don’t talk about money with their kids?
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In the absence of information, people make stuff up. Our clients’ beneficiaries may assume their parents have modest means, which sets them up for a big surprise when mom and dad both pass. Or, they may guess that the lack of communication indicates fear or shame. The children may associate money with something to be hidden or avoided.
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All of the assumptions are unspoken and therefore often wrong! Kids might assume that they’ll receive an inheritance, while parents assume they will give everything away. Beneficiaries might assume that they’ll get help paying for grandkids’ college. But grandparents might assume their children would be offended by the offer to help.
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When families don’t talk about money, they miss a great opportunity to convey the values and habits that lead to wealth creation.
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Our clients may inadvertently rob their adult children of the ability to learn on the job with more experienced parents. Clients have had a lifetime of working, accumulating, spending and giving. If they don’t discuss their decision-making process, their beneficiaries don’t benefit from their experience and wisdom.
Encourage Family Conversations
Advisors can encourage family conversations about money by building their conversation toolkit:
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Ask your clients about the dynamics of their family conversations. Find out if their kids know they have an advisor. Learn about their discussion patterns: when do they communicate? How formal or informal are their talks about jobs, money, savings and giving? What do they see as hurdles to deeper discussions?
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Encourage charitable giving discussions. One family I know gives a $100 bill to everyone at Thanksgiving. Their instructions are to find someone who needs it and give it away. When they get back together at Christmas, they share stories about how they gave the money and to whom. This is a fun project and builds the muscle of talking about money without being too personal or threatening. And it reinforces the value of charity.
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A step beyond the $100 bill could be a family discussion about a larger gift. Your clients could set aside $5,000 or $10,000 to be given away. Together, the family can decide if it should go to one or more recipients. And as suggestions come in, this is a great time to ask, “Why them?” That moves the conversation into a values discussion. It helps surface what’s important to us and why. Ultimately, the family could begin documenting their shared values, which easily leads to an explanation of the family’s resources to fund those values.
As an advisor, you’re one of the few people that your clients talk to about money. This is an honored position, but it also comes with responsibility. One responsibility that might not be obvious is helping your clients talk more effectively about money with their families.
