Alchemia

At the Alchemia Group we are helping our clients think & act differently in regards to their wealth and its impact on thier family - because we know it is more than just numbers and plans, it's the Balance of Art & Science with Pragmatism and Vision.

Welcoming the Family Money Conversation (February 4, 2015)

One area that is a perennial discussion for me involves the ‘How and When’ of telling your children about the family’s money. There is not one short answer as every situation is different and all the conversations need to be age appropriate. What is agreed upon though is the conversation needs to happen sooner rather than later. Mindfully approaching this family practice can be invaluable for your child’s financial future.

This post will look at a mindful approach for younger children. A future post will talk about managing the discussion with older children, even those with their own children.

Ron Lieber recently wrote a column for the New York Times  based on his book The Opposite of Spoiled. He begins with a story:

When Scott Parker wanted his six offspring to know more about the value of money, he decided to do something that many parents would consider radical: show them exactly what he earned.

One day, he stopped by his local Wells Fargo branch in Encinitas, CA, and asked to withdraw his entire monthly salary in cash. In singles. It took 24 hours for the tellers to round up that many bills, so he returned the next day and took away the $100 stacks in a canvas bag.

His oldest son, Daniel, who was 15 at the time, remembers the moment his father walked into the house and dumped the $10,000 or so on a table. “It looked like he had robbed a bank,” he said.

After a pause to let it all sink in, Mr. Parker began peeling off bills. He told them about taxes, set aside money for a tithe to their church and made a big pile for the house payment. The singles piled up for soccer and scouting and hamburger night. By the end, there wasn’t much left over. “I was trying to make as big of an impact as I could, and I definitely had their attention,” he said recently.

He then makes several important points:

Your children deserve to know what you make. It may sound improbable but you can begin to initiate them when they are as young as 5 or 6, building their knowledge slowly and giving them the real answer while they are still teenagers. Handle it right and it will be one of the most valuable lessons of their childhood. 

We adults tend to do a miserable job of answering children’s money questions. We push them aside, sometimes defensively and sometimes out of desire to keep the children ‘innocent’ as long as possible. This shielding makes little sense given the responsibilities, given the financial responsibilities their generation will face, starting with the outsized college tuitions they will encounter. 

Start with asking the same question every time they ask you about money: “Why do you ask?” in a tone that makes it clear you are glad they asked. This stalling tactic gives you a chance to find out what is on your child’s mind and formulate a real answer rather than a kneejerk avoidance.

Start with something you, as a family, spend money on regularly. The grocery store is a great opportunity to share the idea of a food budget and the idea of wants versus needs as you navigate the aisles. Some children even get in the couponing, collecting a portion of the savings from their parents.

If your child knows how to use the Internet you might be shocked how much information about your family he or she already possesses. For example, Zillow gives approximate home values. In some instances your salary information may also be accessible online. So it may be best to begin the conversation sooner rather than later.

In addition to the above article there are several other very current pieces available from the Wall Street Journal and Forbes to help. The most important point is to begin the conversation. Ask your financial advisor for help or send me an email.

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Welcoming the Family Money Conversation (February 4, 2015)