Why Tell: Revealing Financial Information to Children

‘Less is more’ is the strategy most families adopt when informing next generation beneficiaries about assets for which they will—sooner or later-- be responsible. It’s understandable: few teenagers (and not so many college students) appear to have the maturity or judgment to be thoughtful stewards of significant assets. So, like withholding the privilege to drive until 16-year old Sam takes driving lessons, parents choose to withhold financial information until (they hope) 25 or 35-year old Susan is equipped to handle the information.

But kids know things. Some knowledge is intuitive; some things kids deduce; some things they THINK they know; some they make up; and other things they seek out (Google is easy and Lexus/Nexus is one of the mixed blessings of that school tuition you pay). Often the result is that, in lieu of actual information, young people come to their own reality about their financial circumstances—however fragmented and inaccurate it might be.

• “Oh, I don’t have to think about that stuff” [managing money, saving, spending thoughtfully, etc.], one teen age girl said in a financial workshop, “my father takes care of all that for me.”
• “I’m too young to worry about this,” one 16-year old said to her peers in a session on credit cards and compound interest.
• “This doesn’t have anything to do with me,” declared one 25-year old said confidently to an advisor [while running up debt and refusing to get a job], “I’m getting a trust fund in 10 years.”

The young people quoted above are not dealing with a central reality of their lives. And, by default, they will assume a level of dependence that will leave them unprepared to audit the auditor, discern good financial guidance, and make decisions which carry the added benefit of building confidence and independence. This is the parental dilemma: to share and be in control of information children get or leave their awareness—and attendant consequences-- to the unpredictability of what kids pick up from peers, other relatives, their own intuition and happenstance.

Truth is good. Truth tells children you take them seriously, that you believe they have the capability to handle family information discretely, and that they are-- in a deep way—part of the family. Truth, clearly shared, is your best shot at being in control of what and when children learn more about who they are, what your expectations are, and what they need to master to be responsible stewards of their assets— human and financial.

We know that children who have regular, explicit conversation about sex and drugs with parents are more likely to practice safe sex and less likely to abuse drugs. Similarly, young people, exposed early to the practicalities of money and the scale of their assets, tend to be more engaged and thoughtful about the stewardship of their legacy. To be sure, many children struggle with the reality of their wealth. (“We were always prosperous,” one twenty-something told me, “But now that my father’s company has gone public, I’m a freak. I don’t have any friends who I can talk with any more.”) And many parents, recalling the difficulty of their own initiation into family wealth, try to protect their children from similar hardship.

But today’s young steward has many more resources (peer groups, workshops, master classes, books and articles, etc.) than previous generations. And secrets of any kind tend to have an insidious effect on relationships. The inheritance of wealth often raises the question of trust (as in, ‘who can I?’). And wondering if they can trust their own parents to ‘tell the truth’ when they are constructing stories from bits and pieces of data on their own, makes this issue all the more potent.

Few parents would expect a child to perform a Brahms concerto or play the US Open without years of coaching and practice. So when it comes to preparing these same children to handle substantial assets, withholding information and ‘hoping for the best’ is at least as ineffective as sending the child off to play a set against Federer without serious training. Which is not to say one sits a child down with a stack of financial statements, a bevy of advisors, and a day of “This is your life.” Presumably, the first time your 3 year old asked, ‘where do babies come from?’ you didn’t give them a medical school class, but answered in a way appropriate to their age and the context of the question. There is no formula, right for all children. There is your willingness to tell the truth, stay engaged and keep coming back—even when that difficult teenager makes you throw your hands up in despair.

As with potty training, teeth brushing, curfews, and dress codes, your kids knew that if you stayed on topic (dare I say
nagged?) you were probably serious. So tell. Tell clearly, talk often and provide many opportunities for children to assimilate the knowledge of their lives. They are not their money—but unless they have an environment in which to explore their identity –with money as one factor in that identity—the money itself will take on power you don’t intend—and result in consequences you were trying to avoid. Tell, so your children will know they can count on you to tell the truth. Tell, so they know you are in this journey with them. Tell so they can live with your dreams for them.