How to talk about family wealth with your children

Amanda Lott
Executive Director, Head of Goals-Based Planning

Julia Chu
Co-Head, Philanthropy Centre  

Victoria Bolton
Executive Director, Wealth Advisor

While discussing wealth with children may understandably feel daunting, the good news is that discussing your family’s financial resources shouldn’t start—or end—with a dollar amount. Instead, talking to your children about your wealth can be a slowly unfolding process that gives family members a chance to explore what they want for themselves, for each other, and (perhaps) for the world at large.

Along the way, you can trace the family’s roots, identify core values, and teach children to think carefully about the wealth they enjoy now and will one day inherit. Together, you can develop a unique narrative for how your family sees itself.

How, exactly, do you do all that? Here are three steps that might help you uncover what’s important to your family as well as how individual and collective goals might be achieved.

1. Articulate your vision

Start by asking yourself these questions: What does your wealth mean to you—given what you value most in life? How do you want your wealth to shape the lives of your child/children? What priorities do you want to fund? (Education? Family travel? Philanthropy?) What “wealth pitfalls” do you most want to avoid? (Entitled children? Meaningless spending?)

Few people start out with a set of core principles already in hand. Taking the time to craft them for your family before the talking starts can produce a helpful guide to realizing the future you envision.

After you have some idea of what you want, go over these questions with your partner to uncover key points of alignment or disagreement. Then do the same with your children.

Be aspirational in your conversations. Also be sure to focus on softer (i.e., non-monetary) outcomes. (Family unity? Community involvement? Skills development?) Don’t try to assign dollar amounts or create a framework for the future at this stage.

The key to making these conversations successful is to listen to others and respond thoughtfully. See a child’s question as an opportunity to share goals, detail expectations and communicate values.

Also, do not expect answers to come quickly, or to stay the same. Over time, foundational principles will emerge from ongoing conversations.

Activities to consider: 

• Create a family tree with your children and trace successes—and failures—with wealth over time.
• Have children make a list of questions regarding money/the family’s resources. Focus initially on why they’re asking the question—not on answering it immediately. Their reasons for asking may help you focus your response.
• Incorporate your core values into an overarching motto that sums up your family’s approach to wealth.

2. Bring your vision to life

Are you sure your assets will pass to heirs in the ways you intend? Have you given ample guidance to trustees? Did you communicate your expectations to family, trustees and other interested parties about how and when family funds will be made available to various individuals?

As you and your partner create and update wills, trusts, letters of wishes and other estate planning documents, make sure they align to the core principles you and your family have identified. This legal framework will guide how your heirs benefit from and steward the wealth you have created. So, for example, if travel is something your family values, you’ll want to make sure there are funds and potentially trust agreement language that enable travel.

Ensuring the education of future generations is a priority for many families. If your family shares this goal, draft an education spending policy, (i.e., a set of procedural fairness guidelines for how family education expenses will be funded.) Ask yourself: How far beyond high school do you want to underwrite a child’s education? Will you cover tuition, room and board plus course fees? What about entertainment, cellphones, overseas study? Will you fund comparable expenses for a child/grandchild who chooses not to go to college? Under what circumstances?

If your financial support for your children’s schooling comes with expectations regarding their lives after college (career goals, spending habits, budgeting, etc.), make these caveats known to them. 

The aim is to maintain open communication channels, and to clarify how the family’s financial resources may be used—or not used—on each heir’s behalf.

To this end, you may also want to identify roles and responsibilities you would like family members to assume as they mature. Participate in family businesses? Manage trusts? Guide decisions about investments or philanthropic giving? Earn money? Save it? Make such topics part of regular family conversations.

Similarly, regularly communicate with outside advisors to make sure your estate plans are current and in line with family goals. Include your partner, and consider including your children in these conversations, as appropriate.

Cautionary tale: Too often beneficiaries don’t learn inheritance details or gain insights into family wealth until long after they’ve made unalterable life decisions. With more advance knowledge, they might have chosen differently.

Activities to consider:

• Weekly family dinners: Make one night in your family’s busy week a set time to talk about plans for the future, hopes and concerns, investment philosophy, contingency and estate planning, etc.
• Consider writing a letter of wishes to express to your beneficiaries your values and intended purpose of your wealth. Letters of wishes are not legally binding and don’t necessarily disclose dollar amounts. They provide guidance to trustees and beneficiaries about your intentions. Once your attorney ensures that they align with your estate plan, these letters can be shared with family members at any time—which may create an enlightening event for all involved.

3. Encourage family engagement

Are your children ready to take the reins? Manage the wealth you created? Control family businesses or other assets? Make informed investment decisions for themselves?

Children gain a great deal from understanding how the family manages its resources: governance structure and operating principles, as well as the roles and responsibilities they may be asked to one day assume.

Will they become a trustee? Be involved in philanthropic efforts? If so, then at a minimum, they must learn to speak knowledgeably with investment advisors and estate administrators. If they’re going to be a trustee or run a private foundation, greater technical mastery and training are needed.

Such learning doesn’t happen overnight. Active appreciation and stewardship of family resources begin by helping children develop leadership skills and financial acumen, according to their ages, abilities and interests. It also takes place in many forums: ongoing family discussions, formal family meetings/retreats led by outside specialists, tapping the expertise of family advisors, online study or in-person courses.

And don’t overlook the importance of your leading by example. Helping your family live their values in an environment built on positive communication, behavior and lifestyle is central to their actively embracing the values you wish to instill.

Activities to consider:

• Set aside a (small) discrete pool of funds to support your child’s/family’s philanthropic interests. Once it’s clear where their interests/passions lie, they can research suitable organizations, apportion funds, and monitor/report on outcomes. Keep in mind: Young family members are more likely to become involved when they have a hand in picking the cause(s) your family supports. Also, because philanthropy typically involves only a small portion of a family’s balance sheet, children ultimately may gain limited insight into the family’s resources. So this can be a good first step but not the last, since philanthropy can’t replace active and ongoing discussions about, and engagement in, the family’s overall goals for its wealth.
• Meet periodically to assess topics of interest to further learning within the family.

We can help

Helping your children learn how to manage wealth is a lengthy and multifaceted process.

Your J.P. Morgan team can provide meaningful assistance and materials to help your children manage their finances and invest wisely, for example:

• Saving and spending activities for younger children. Ask your J.P. Morgan team for a copy of our Children & Wealth Workbook.
• Basic investment and financial planning advice for high schoolers and college students. 

There is no better time than today to start sharing your values on wealth with your children. Your J.P. Morgan team can help you prepare for and navigate these conversations as well as provide resources to empower your children in their financial lives.