Here’s how one couple told their daughters about family wealth, while offering the support they’d need to manage money.

 

Even in extraordinary times, some things don’t change. Like the need to prepare your children, in age-appropriate ways, for managing money. What also doesn’t change is the need to accomplish this while staying true to your family’s values, preferences and goals for your wealth.

We believe in creating an open dialogue as early in your children’s lives as possible, sharing facts relevant at your children’s ages and making intentional decisions about how you want them to interact with the family’s wealth. Children as young as three to five are curious about money, can pick up on subtle queues and are capable of learning a great deal. If you don’t tell your children about the family’s wealth, they may well find information somewhere else, and make assumptions based on their observations and, perhaps, their peers’ comments. Preparing your children for having those money conversations with their peers may be something you want to cover. 

The case study below illustrates the importance of being open with older children about their inheritance and helping prepare them to manage it—through conversations that can be opportunities for your family to discuss your values around money and the expectations you have as parents for how your children will use their funds. 

Remember: If you’re considering creating, funding or adding to trusts for your children this year, it’s best to start discussing your options as early this fall as possible. New trusts take time to create properly—and any trust should be thoughtfully integrated into your overall wealth planning.

This family’s approach to teaching children financial responsibility appears in Teaching Your Children About Wealth: A guide for parents and grandparents. Ask your J.P. Morgan team for a copy.

Our two daughters were set to inherit a meaningful amount when they came of age, but until they were 14 and 16, they didn’t know enough about how to manage wealth. Of course, we’d long been giving them allowances and doing our best to model responsible financial behavior. But we felt that they would need to learn much more, considering that one day they would be responsible for their finances and investments in a complicated world.

We worried that if we tried to tell them what to do too forcefully, our advice might go in one ear and out the other. We wanted to get better at discussing money with them and to give them advice. But we needed some help establishing this conversation. I could just imagine trying to do it on my own, and my younger daughter sneaking looks at her phone as we were speaking and me blowing my top. So, for the same reason my wife and I shared our love of tennis with the girls and taught them the basics but for the finer points turned to professionals, we looked to the J.P. Morgan team to partner with us. Talking to teenagers can be difficult, and we knew the team could help us build better communication and collaboration with the girls around wealth, and as financial professionals, really deepen their understanding.

We set up a sort of “starter” trust for both girls and funded it with a relatively small sum. We also opened custodial brokerage accounts for each of them. To begin, before the girls met with the Trust officer and J.P. Morgan team, we talked with our daughters. We shared our values, talking about what we think is productive use of capital, and our expectations for the role of the trusts in their lives. We said we wanted them to become fluent in the language of personal finance and that to lay the foundation, we were going to have them meet with the J.P. Morgan team, with us present at first.

Then we had the girls go together to meet with the trust officer who’d be managing their trust. We wanted to make sure they knew her name, had her telephone number, and understood how accessible and helpful she could be. They also met the rest of their J.P. Morgan team at the firm’s client center in the city. The trust officer took time to explain to our girls how trusts worked and how they could use their starter trusts and the brokerage accounts to learn about investing. The group also discussed our intentions for wealth in our family, and how much the girls might spend and still have the principal grow.

The girls had good questions. For example, when our oldest daughter heard that she and her sister were to be beneficiaries of the same trust, she asked if the trust should be cut in two to avoid their fighting in the future over spending. The trustee agreed this was a good idea, as did we, so those arrangements were made.

One member of the J.P. Morgan team, an investment specialist closer to the girls in age, not only made house calls to follow up, but was also available by phone to keep tutoring them in investments, their portfolios, interesting stocks, and how their choices would impact their ability to get closer to their goals. Our daughters are quick learners, and we are ever more confident that with professional guidance, they will grow responsibly into their inheritances.

This family took a very structured approach to their family’s money conversation. They began with the intention of preserving wealth and holding open conversations with their daughters. They aligned their intent with their family culture and then engaged professionals to help deepen their children’s knowledge.

But this is only one approach—that happens to include trusts and older children. Your family, your finances and your goals may require another. Speak with your J.P. Morgan team about how you might empower your children in money matters. 

 

This case study is based on a real-life story but has been altered to preserve privacy and confidentiality. It may not be representative of other individuals’ experiences. Information is not a guarantee of future results.