Are you an owner of a thriving business or a medical or legal practice? Maybe you are a highly paid executive? If you have children, at some point, they may discern how wealthy you are – and in turn, learn how “rich” they are. But if you don’t lay the groundwork for a talk about finances, it may leave you in a lurch when they figure it out. So, how will you handle that moment? How will they deal with that knowledge? Talking to your kids about your wealth is tricky. So, to help you navigate the conversation, here are some things to keep in mind.

Start with your Values

Some kids end up valuing family wealth more than others. We all know (or have heard) about children from wealthy families who grew up to become opportunistic, materialistic, and unmotivated young adults living off their parents’ generosity. Other children learn to treat family money with respect and admiration. They recognize its role for the family and see its potential to help charities and the community.

What accounts for the difference? It may boil down to values. When you hand down the right values, a young adult is poised to hold wealth in high regard and receive it with maturity.

Before you sit down with your children, talk to your spouse. You want to ensure you both communicate the same values to your kids. So, come to a consensus as a couple on what lessons you want to instill in them. For example, ask yourselves, “do we want them to be charitable? Do we want them to be self-sufficient? Where do we want their priorities to lie?”

Remember: children learn best by example. If you demonstrate these values and self-restraint, they are more likely to emulate those qualities. That will make a talk about using money more comfortable for everyone.

Make the Conversation Honest

Some parents never tell their children how wealthy they really are. Many people feel like money is a private matter, making it difficult to talk about. But discussing your level of income or earnings with your kids adds another layer of discomfort. So, it’s not at all uncommon for parents to forgo the conversation entirely. BECU, a not-for-profit credit union with over 1 million members, conducted a Finance and Parents Survey in 2019. Of the respondents, only 28% report talking finances with their kids. An overwhelming majority cited fear as a major factor stopping them from having a talk about money, with 42% admitting they themselves were afraid.  

Leaving this discussion off the table means risking ignorance. In hiding the details and avoiding the talk, parents may see a child grow into a young adult who is ill-prepared to understand and manage wealth. As a result, it’s not only important to talk about money in general, but your own relationship with money.

And don’t think kids don’t pick up on things by themselves. From their first playdates, kids notice economic differences between them and their peers. So, the longer you hold off on the conversation, the harder it will be for both you and them.

Set Clear Expectations

One good step is to set some expectations. After your kids learn how wealthy you are, they may expect your money to play a financial part in their personal lives, especially in adolescence. Tell them, frankly, what you are willing or not willing to do and why. Where will the family wealth come into their lives?

Part of the discussion should revolve around financial help. Will you want to fund their college education or help them with car payments? Consider how much you intend to contribute to these milestones. If you want your children to play a part in the payment process, tell them so. It’s better to prepare them ahead of time so they can plan and save accordingly.

Another important expectation to discuss is inheritance. Discord may arise in a family if they think you failed to split the estate evenly. So, it’s vital to talk about your intentions at some point. Children often become attached to certain things in the family estate, such as a parent’s engagement ring or an antique passed down through generations. There is not only monetary value to these items, but sentimental value as well.

Regardless of the decisions you make, explain your actions to your children. If you decide something without walking them through it, they may think you made choices arbitrarily. Provide them with all the factors you used in your decision-making process.

Opportunities versus Extravagance

You can help them see that wealth has meaning. Some financial professionals like to ask their clients the question, “what does having money mean to you?” In other words, what should that money accomplish? What dreams should it help you pursue, and what fears or worries could it address? How does having money fit into your vision of success – is it integral to it or inessential?

A financial advisor asks these questions to help you figure out your relationship with money and see its value. Likewise, you need to help your kids find their own answers.

One of the best ways to do this is to help them with goal-setting. Teach them the difference between a long-term and short-term goal. For instance, they may want to buy a game or new electronic today. But if they put money away, they can save up for something more worthwhile.

Oftentimes, a summer job or temporary work can help demonstrate the importance of saving, too. An experience like that allows your child to appreciate the effort earning money requires and how easily you can lose it if you’re not careful. 

The Bottomline

It has been said that money never transforms character; it simply reveals it. The responsibility of handling wealth amounts to a test of character. So, don’t underestimate the value of your influence. Talking to your kids about your wealth may help them pass that important test when the time comes.

If you’re nervous, know you’re in good company. You don’t have to tackle everything in one sitting, though. Instead, build up to topics as they age, when they are mature enough to handle them. Until then, you can lead them to appropriate behavior through example.