August 6, 2018
Do you keep your kids in the dark about your family’s money, or have you given them a flashlight so they can begin to find their way? It’s an important question to consider.
Several recent events have catalyzed today’s discussion. It seems clear that each of our families take a unique approach to sharing the details of their wealth with their children. The way we as a firm work with our families is also very different. However, we always see deep value in helping our clients manage, teach, and mentor their children (of all ages) about the role money plays in our lives. We believe each client should gain the confidence that their children are aware and prepared for their own financial future. This notion is something that Nick has coined as the “responsibility of wealth”. We do not approach these issues from the stand point of how to manage the stereotypical “spoiled rich kid” but rather from a belief that we should help young people develop a lifelong ability to understand and manage their financial affairs. We believe that there are positive long-term benefits in spending the time and energy to educate and prepare the next generation on how to deal with money.
Recently a young man who is the child of a client wanted advice on the various company 401(k) plans in which he had participated since he graduated college. We worked out a plan to consolidate those various pockets of capital into a single rollover IRA so that it could now be effectively managed and reviewed. Another client’s child wanted to discuss combining their assets as they entered marriage. Another young person was seeking advice on the merits of budgeting and savings. These are just some of the examples of the issues we address during our work each day. It’s hard for young people who have limited financial means to reach out to professionals for counsel, but we feel this service, and the time spent with this next generation of investors, is critical. We embrace the opportunity to help.
Each client has a different opinion as to what they want and when they want their children to know about their wealth. This is of course a personal decision. Some families choose to keep their children in the dark about their families’ financial circumstance. In effect, these children receive the news when an estate lawyer reads the will. Thankfully, this is the exception for most of our clients. Many clients see the benefits of sharing their family’s financial circumstances with their children at a much earlier point. Some families have regular family meetings to discuss the market and cash flow needs of the family. There are no right answers as each family and each family member is different. But we are convinced we all have a responsibility to make certain that family members are prepared for the future.