During the holiday season, many of us celebrate with family, friends, and those who bring us joy. This kind of Quality time provides a chance to have meaningful conversations and plan for the future. Financial parenting/grandparenting can play an important, but sometimes overlooked, role in these exchanges.

According to a study of 650 families with at least $3 million in investable assets, two-thirds have not talked to their children about their wealth and have no plans to do so.1 While some families feel like talking about money is taboo, failure to have these discussions can create complications and a lack of preparedness.

So what is the best approach to ensure that your family is equipped to manage money, including an inheritance that could be life-changing?

Rather than avoid the topic or add pressure by postponing until “the right time,” at Haverford Trust, we recommend normalizing the discussion and educating your family from the outset – establishing good habits early and having transparent conversations often.

Here are a few ideas for developing financial confidence in age-appropriate ways.

  • Elementary Years – You can lay the foundation for healthy habits and shared family values around money at an early age. If your children or grandchildren are under the age of 12, teach them by involving them in the process. A piggy bank is a timeless classic to educate a child about saving. Taking things a step further, talk about how Spending represents the money that will be used very soon, Sharing enables the child to select a charity or cause to benefit, and Saving introduces the concept of working towards a longer-term financial goal.
  • High School/College Years – Begin credit/debit talks with teenagers as they enter secondary and advanced education. Young adults need to understand the importance of a good credit history. You may want to start with a prepaid card or a debit card with overdraft protection set at a low limit. Talk together about how interest accrues, the dangers of late fees, and the importance of keeping the card safe. Monitor their card on a regular basis to ensure responsible usage and discuss issues like inappropriate spending patterns before they become problematic habits.
  • Adulthood – Many educated adults in their 20s, 30s, and 40s have reported feeling overwhelmed or unprepared as inheritors. To build confident stewards of wealth, consider including younger family members in portions of your advisor meetings, such as general discussions about the market or sectors of interest. Be sure to have open dialogue about potentially controversial issues or special considerations like family heirlooms, vacation homes, or beneficiaries with special needs. Discuss charitable gifting plans in place for during and after your lifetime to reduce the risk of any surprises or unmet wishes.
  • Talking with Aging Parents – Initiating a conversation with an older parent or loved one who is disinclined to discuss topics of mortality and money can be even more sensitive in nature. It is important to emphasize that the purpose of the conversation is not to determine how much you might inherit, but instead keep the focus on the goal of carrying out your loved one’s wishes and ensuring the transfer of assets goes as smoothly as possible after they pass. As an alternative approach, you can explain that you are working on your own estate planning and having a complete picture of the family’s finances can help your preparations, benefiting all surviving children and grandchildren.

Families who have been inheriting wealth for several generations often have existing systems in place for governing disbursements and a shared history of expectations. Even in the best of circumstances, however, it is critical to be organized and open about the roles and plans in place.

Talking about money can be a challenging task to navigate. Your portfolio manager and the entire Haverford Trust team are a resource to help you plan for and execute these conversations. We welcome you to invite your next generation family members to future discussions or Haverford events that may be of interest. Please contact your portfolio manager to discuss further and enjoy your holiday celebrations.

 

1https://www.nytimes.com/2019/08/02/your-money/parenting-wealth-discussions.html

The information provided herein is not intended to be, and should not be construed as, legal or tax advice or a legal opinion. Haverford does not provide legal or tax advice. You should contact your legal or tax advisor regarding your specific tax situation prior to taking any action based upon this information.

Investments in securities are not FDIC insured · Not bank guaranteed · May lose value.