There is an art to revealing family wealth to the rising generation without making them feel isolated, entitled, or directionless. Research suggests that early disclosure of wealth in a gradual and age- appropriate manner – the “dimmer switch” approach – can empower, engage, and help children. It offers time to develop a healthy relationship with money, understand responsibilities, and become financially literate from an early age.
To be successful inheritors of wealth, children need education in finance and money management, as well as freedom to evolve their identity and self-perception. Kristin Keffeler, author of The Myth of the Silver Spoon: Navigating Family Wealth & Creating an Impactful Life (Wiley, 2022), suggests that parents should aim to ground their own decisions in strong values and align choices with their idea of what it means to thrive. They are then better able to set and hold limits that help their children build important life skills.
Defining core values and establishing a family mission statement or governance structure can provide a clear, coherent frame for educating children about family wealth – and holds to account the current custodians. If the family doesn’t already have one, the process of creating a statement can provide a way of including children in defining the family’s identity – and the purpose of its wealth. Even young children can contribute, through simple exercises such as naming a handful of values that they think best describe the family. From these, parents and children can create a value statement together. For example, if a small child names “kindness” as something that matters, parents can show them how this translates into a family commitment to philanthropy. Converting principles into actions helps foster a sense of responsibility to the wider world, and an awareness that wealth can be used for doing good, not just material gain.
The amount of financial help parents will give, and for how long, needs to be communicated clearly. Parents may think they’re being supportive, but an unlimited financial safety net can be stifling – even debilitating – to a child’s development. Children need to experiment, make mistakes, and think their way out of financial difficulty – even if that difficulty is artificial. A good steward of wealth must be financially competent and understand that resources are never unlimited. Letting children and young people fail can be hugely valuable in their development of financial accountability and experience, as well as teaching fundamental life lessons.
For all we might hope to tell our children, research shows that habits are caught, not taught. “Simply stated, children imitate what they see, and forget what they are told: there should not be a disconnect between what the parents say, and the way they behave.” (Brown & Jaffe). Positive role- modelling can be the most effective way to show that work is required to earn money, and that saving and spending are processes that need thought. Parents can set a good example by being productive in front of their children, whether through paid work or volunteering.
