Talking to Children About Money: A Guide for Wealthy Parents

Navigating the Complex Conversations of Wealth, Responsibility, and Values

Throughout children's lives, we need to talk to them about money. This necessity holds true across all economic statuses but is especially charged for affluent parents. Most people try to pass on efficient ways to acquire money to the next generation, but very wealthy parents also need to discuss the meaning of money.

These parents face questions about the responsibilities, duties, and challenges that come with their wealth. They need to give their children tools to understand what value money has in their eyes. To succeed in this educational effort, parents must be able to discuss how they or previous generations accumulated their wealth and what they learned along the way. They should imagine scenarios with their children (depending on their age) where the family loses its assets and consider how their lives would change. The core of this educational goal is to center the conversation on: What do we want to achieve with our money?

Many parents are willing to have such in-depth conversations, but they are often stopped by a much simpler and seemingly superficial question: "Are we rich?"

Because this question can be daunting, it's better for parents to address it proactively rather than waiting for an awkward moment. The idea is to use the children's responses as a springboard to deeper discussions about the meaning of wealth and the question, "What does it mean to be rich?"

For young children, their answer might be a number, such as "Rich is someone who has ten million dollars." If wealthy parents find this reaction stressful, they should take a deep breath. This response is an excellent starting point for a Socratic dialogue that challenges their thinking. For example, parents might ask, "Okay, I agree that a person with ten million dollars is rich, but does that mean someone with five million dollars is poor?"

This is just one example. There are many more questions that can help children think about money in a nuanced way rather than comparing themselves to others. Here are some more examples:

• Is there anything you can do with ten million dollars that you can't do with five million dollars?

• How is the life of someone with ten million dollars different from someone with five million dollars?

• Is a person with ten million dollars happier than someone with five million dollars?

• Are they happier than someone with one million dollars?

• Are they less happy than someone with twenty million dollars?

  
  

Questions about happiness are particularly important because they relate to recognizing that money provides protection against many of life's dangers. They also help children understand that, as social creatures, significant social ties and a sense of personal meaning are crucial for happiness, not just money.

Parents can deepen this discussion by asking questions like: Who is the richest person you know (in life or from the media)? Does this person seem happier than you?

Encourage children to reflect on what gives them the most satisfaction and what makes them sad. There's a good chance their answers won't be directly related to money, making it easier to show them that money's role in their lives is limited to certain matters.

For parents still fearing this conversation, here's a recommended foundation for your answers to your children: "There is more than one answer. In the simple financial sense, we have enough money to buy everything we need and most of what we want. As long as you are young, we have enough money to take care of you, and in that sense, we are rich.

"But another aspect of our conversation tonight is that the meaning of money is limited. There are other things we can't measure with money, like happiness, life satisfaction, or health. You'll need to think about how to use money to achieve other goals and do things that give you satisfaction. Understand what responsibility you have to help yourself and others become healthier or happier."

This is the most basic conversation wealthy parents should have with their children. On this foundation, you can build deeper conversations as they grow older. For these conversations to be meaningful, parents must avoid sending conflicting messages about money. It is easy to say money does not indicate a person's quality and is only an external sign. However, if you openly pity those who live in different neighborhoods, drive less impressive cars, or dress differently, children will internalize these judgments more than any verbal lesson.

Similarly, if you stress the importance of contributing to the community but do nothing philanthropic, your children will start to doubt your words.

Another educational point is how money affects social interactions. Be careful not to teach your children, even implicitly, to buy affection with money.

In conclusion, if you avoid talking to your children about money out of fear they'll show off, think again. Avoiding this conversation may convey that family wealth is a dirty, shameful secret. This initial conversation is an excellent opportunity to teach your children the difference between privacy and secrecy. Explain that while there's no need to be secretive about money matters, you still expect them to maintain the family's privacy.