As parents, we strive hard to give children what they need to become healthy, educated, independent and well-adjusted people.
Teach your kids to ride a bike? Check. Make sure they brush their teeth every day? Of course. Fight to get them into the best elementary school and hire a tutor for the college boards? Anything that’s needed.
But there is one area where research shows parents are not always as proactive as they should be: money and wealth. Talking about finances can seem gauche or inappropriate with children. Yet kids are not born knowing how to save, budget or invest any more than they are born knowing how to snowboard.
Everyone needs to develop a basic understanding of financial matters. And young people who may eventually manage substantial assets need to be particularly financially literate. Both their opportunities and risks can be greater. Consider the old adage “shirtsleeves to shirtsleeves in three generations.” According to one well-known study on intergenerational wealth transfer, as much as 90% of the core wealth can be gone by the time grandchildren make it to retirement.1
In short, academic literature and the experiences of our advisors make it clear: Great advantages go to children whose parents, grandparents or other family members consciously and consistently teach them about the mechanics and implications of wealth—starting as young as three years old. Because, as Susan Doty, a nationally recognized leader in financial education, likes to say: “It is never too early to learn, and never too late to teach.”
To simplify teaching about managing wealth, we identify seven essential financial skills that children need to acquire, namely how to: save, spend, invest, share, borrow, earn, protect. For interested clients, we even offer a workbook of activities that help teach these skills broken down by six different developmental ages. (Be sure to ask your J.P. Morgan advisor for a copy.)
Philipp Hecker, Head of Wealth Planning & Advice at J.P. Morgan, says the selection of the seven priorities was informed by three sources: our advisors’ collective experience, consultations with leading financial educators, and special considerations given to the unique needs and opportunities of our wealthy clients. While financial literacy is increasingly a part of many schools’ curriculums across the country, Hecker says, relying on schools alone to do the job may not be enough.
“Children growing up in homes with significant resources face unique challenges,” Hecker points out. “For example, cybersecurity is a bigger concern. Their families are more exposed because of higher public profiles and greater wealth. On the flipside, wealthy families also often have more opportunities, with greater access to credit and the potential for really impactful philanthropy.”
Also, all education begins at home. Parents mold children’s understanding of these issues, explicitly through discussion or implicitly through role-modeling; kids are always watching! That is why many of the learning activities we recommend can be customized around each family’s unique values, and are designed to fit into your busy lifestyles.
Hecker gives an example of an exercise around saving. As children turn six or seven, one suggested teaching activity is to replace the standard-issue piggy bank with three glass jars labeled “Spending,” “Saving” and “Sharing.” Children are encouraged to divide their allowance into the jars each week.
But how much should be put into each jar? There is no one right answer. This is where family values play a role. If one family particularly values philanthropy, those parents might encourage that a full third of allowance goes toward sharing. But the point is that the values will help children make informed choices.
Susan Doty, a key contributor to J.P. Morgan’s “Children and Wealth” program, says that one of the greatest advantages of parents and grandparents teaching children about wealth is that it will prompt families to have detailed discussions about what their values really are. “When you get into the exercises,” she says, “all of a sudden you need to have what I call a ‘framework’ discussion. What do we really care about as a family?”
For example: Imagine drawing up an “allowance contract” with your nine- or 11-year-old. Decide together what you consider to be the child’s “non-essential” expenses that you’ve typically covered, and increase the child’s allowance so that he or she can take responsibility for some or part of those expenses.
In some ways, Doty adds, the learning of the parents as they grapple with defining core values is just as great as the children’s.
Consider another example: Our experts suggest that when children are between the ages of 12 and 14, parents should switch their allowance from weekly to monthly and set some long-term savings goals. What are those goals? Are they saving for college, for a vacation or for a charity? And how about what happens when a child doesn’t meet the goals or runs out of allowance early in the month?
This is where Hecker emphasizes that families’ awareness of their values is core—after all, children will someday test the limits. And, of course, because children learn as much implicitly from observation as they do from explicit instruction, parents should be aware of their behaviors all the time.
To illustrate the power of positive role-modeling, Hecker shares the example of a family friend, whose teenagers are into clothes shopping these days. She often takes her children to clothes stores and chats with them about the pros and cons of purchasing certain items. Sometimes, she makes it a point to leave a store empty-handed—signaling to her kids that they’re in control of saying “no thanks” and can have fun shopping without buying.
It boils down to this, says Doty: “We have the blessing of resources. The wealth creators are concerned about keeping their children from squandering it, and remaining motivated. If we want our children to be good stewards, to use money wisely, it requires some teaching and learning from all of us.”
Please feel free to reach out to your J.P. Morgan advisor to discuss these and other wealth issues, and to obtain your copy of J.P. Morgan’s Teaching your children about wealth: A guide for parents and grandparents.
Learn more about becoming a J.P. Morgan Private Bank client.
Please tell us about yourself, and our team will contact you.
Purpose of This Material
This material is for information purposes only. The information provided may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). The views and strategies described in the material may not be suitable for all investors and are subject to risks. This material is confidential and intended for your personal use. It should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. Please read this Important Information in its entirety.
Legal Entity and Regulatory Informationa
In the United States, Bank deposit accounts and related services, such as checking, savings and bank lending, may be subject to approval are offered by JPMorgan Chase Bank, N.A. Member FDIC.
JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. JPMCB and JPMS are affiliated companies under the common control of JPM. Products not available in all states.
In the United Kingdom, this material is issued by J.P. Morgan International Bank Limited (JPMIB) with the registered office located at 25 Bank Street, Canary Wharf, London E14 5JP, registered in England No. 03838766. JPMIB is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. In addition, this material may be distributed by JPMorgan Chase Bank, N.A. (“JPMCB”), Paris branch, which is regulated by the French banking authorities Autorité de Contrôle Prudentiel et de Résolution and Autorité des Marchés Financiers or by J.P. Morgan (Suisse) SA, which is regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA).
In Hong Kong, this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request. In Singapore, this material is distributed by JPMCB, Singapore branch. JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMIB and/or JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.
In Australia, JPMCB (ABN 43 074 112 011/AFS Licence No: 238367) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. JPMS is a registered foreign company (overseas) (ARBN 109293610) incorporated in Delaware, U.S.A. Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as JPMCBNA and JPMS, to hold an Australian Financial Services Licence (AFSL), unless an exemption applies. JPMS is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (Cth) (Act) in respect of financial services it provides to you, and is regulated by the SEC, FINRA and CFTC under US laws, which differ from Australian laws. Material provided by JPMCBNA and/or JPMS in Australia is to “wholesale clients” only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Act. Please inform us immediately if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.
With respect to countries in Latin America, the distribution of this material may be restricted in certain jurisdictions. Receipt of this material does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund´s securities in compliance with the laws of the corresponding jurisdiction. Public Offering of any security, including the shares of the Fund, without previous registration at Brazilian Securities and Exchange Commission – CVM is completely prohibited. Some products or services contained in the materials might not be currently provided by the Brazilian and Mexican platforms.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. We do not make any representation or warranty with regard to any computations, graphs, tables, diagrams or commentary in this material which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in it constitute our judgment based on current market conditions and are subject to change without notice. We assume no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, view expressed for other purposes or in other contexts, and this materials should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward looking statements should not be considered as guarantees or predictions of future events. Investors may get back less than they invested, and past performance is not a reliable indicator of future results.
Risks, Considerations and Additional Information
There may be different or additional factors which are not reflected in this material, but which may impact on a client’s portfolio or investment decision. The information contained in this material is intended as general market commentary and should not be relied upon in isolation for the purpose of making an investment decision. Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document is intended to constitute a representation that any investment strategy or product is suitable for you. You should consider carefully whether any products and strategies discussed are suitable for your needs, and to obtain additional information prior to making an investment decision. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by JPM and/or its officers or employees, irrespective of whether or not such communication was given at your request. JPM and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions. Contact your J.P. Morgan representative for additional information concerning your personal investment goals. You should be aware of the general and specific risks relevant to the matters discussed in the material. You will independently, without any reliance on JPM, make your own judgment and decision with respect to any investment referenced in this material.
J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPM or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.
References in this report to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM.
If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan representative.
© 2018 JPMorgan Chase & Co. All rights reserved
INVESTMENT PRODUCTS ARE: • NOT FDIC INSURED • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC. Not a commitment to lend. All extensions of credit are subject to credit approval.