How to Productively Talk to Your Family About Wealth

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Key Takeaways

  • Studies show that 70% of wealthy families lose their wealth by the next generation, with 90% losing it the generation after that.
  • Effective wealth conversations often do not start with the “what” but rather the “why”—i.e., the purpose of wealth and the goals for responsible financial planning.
  • Advisors can also play an important and helpful role in facilitating wealth conversations through family meetings.

Talking to your family about wealth—what it means to you, what challenges and responsibilities accompany it, and what you hope to accomplish with it—can be simultaneously empowering and frightening.

One study found that 55% of parents never—or very rarely—talk to their children about finances. This avoidance is even more common in families with significant wealth.

However, with $84 trillion expected to be passed to the next generation within the next 20 years, creating a plan for how your wealth will be moved forward—and discussing that plan with your heirs—is crucial.

When Should I Start Talking to My Family About Wealth?

Ongoing dialogue allows your family to absorb information, ask questions, and gradually become more comfortable talking about wealth. But often, the first hurdle in having these conversations is identifying the right time to do so.

Every family is unique, and how much you disclose, and when, typically depends on your family’s specific dynamics and wealth situation.

A primary consideration in the wealth conversation is the age and maturity of your children. Emotional preparedness is incredibly important to foster productive, open communication about wealth. And while early exposure to financial education is vital, introducing complex concepts too early can be counterproductive.

One approach is to slowly begin incorporating financial topics into conversation and gauge your family’s response. This can help you understand their level of interest and readiness for more in-depth discussions. Life milestones can also provide opportunities for these conversations. When your children reach adulthood, get married, or become parents, these events often prompt reflections on financial planning, inheritance, and future goals.

Conversations may also take form when the current keepers of the wealth become less able to manage all of the moving parts—typically as they start to age. At this time, the conversation moves away from just talking about finances to talking about what they want to leave behind for the future.

How Do I Begin the Wealth Conversation With My Family?

Once you’ve identified that your family is ready to start getting involved in the wealth conversation, the next question arises: Where do you begin? How do you ensure the conversations are productive, supportive, and engaging?

46% of surveyed investors reported that they actively avoid the topic of money within the family, and 49% are worried about wealth conversations leading to a sense of entitlement in their children or grandchildren. This means that entering these conversations with a strategy in place is extremely important to ensure a successful outcome.

Consider the following tactics to help ease your children into the wealth conversation:

  • Encourage Them to Seek Educational Resources: Before you share details about your personal wealth picture, have your children go through some sort of wealth education. Share webinars, books, courses, or other resources they can dive into. Developing a strong foundation of financial literacy will make future wealth conversations much more productive.
  • Create a Donor-Advised Fund: Involve your family in selecting a charity to support. Encourage your children to do their own research and choose an organization that is meaningful to them. Your family can sit down and present on the different possible charities and then vote on which one you will donate to. This teaches the positive power of generosity and giving.
  • Open Investment Accounts for Them to Monitor: You can also open an investment account for your kids to let them gain exposure to market volatility and start understanding what sort of conversations take place around saving and investing.
Effective wealth conversations often do not start with the “what”—i.e., balance sheets and numbers —but rather the “why”—i.e., the purpose of wealth and the goals that can be accomplished through responsible financial planning.

Father and Son talking about finances

Lessons Learned in Talking to Family About Wealth

Here are a few lessons our financial advisors have learned over the years of helping bridge the gap between generations and ensuring that wealth effectively goes where it’s supposed to.

Lesson 1: Failing to plan means planning to fail.

Taking the time to develop a plan and communicate that plan with those it impacts gives you the opportunity to create a healthy, impactful approach to wealth. You can feel confident that your wealth is being carried forward appropriately, and your heirs will feel purpose and peace of mind knowing your wishes.

On the other hand, not having these conversations or identifying your wealth objects can lead to unintended consequences. Without a clear vision in mind, the wealth you’ve developed over your entire lifetime will not be able to accomplish what you want it to.

Studies show that 70% of wealthy families lose their wealth by the next generation, with 90% losing it the generation after that.

Lesson 2: Transparency is key – even if that means deciding not to involve your family.

70% of surveyed investors question if future generations will use their wealth wisely.

You’re not necessarily obligated to bring your entire family into the wealth conversation, but you are encouraged to disclose your wishes to someone—like your financial advisor.

If you don’t want your family members involved, communicate that with your financial team. Let them know what you’re looking to achieve, where you want your wealth to go when you’re gone, and how they can help you move forward.

Transparency allows you to control the narrative and ensure clarity after you’re gone. And you might find that the question is not whether you should have these conversations with your loved ones, but rather deciding what the right amount of information is and how to dictate that.

Lesson 3: Involvement of professionals leads to more success.

If you’re finding it difficult to know where to begin or how to have these conversations with your family, you’re not alone.

Advisors can also play an important and helpful role in facilitating wealth conversations through family meetings.

Our financial advisors can help you understand what you’re hoping to convey to your family and carry out those discussions effectively. Whether it’s talking to your children about what it means to have significant wealth, the tax implications of such, estate planning strategies, or you’re your overall financial plan—working with an advisor can help alleviate tension and create a positive environment for everyone involved.

Confidently Navigate Conversations about Wealth

You want to do what’s best for the people you love. When it comes to wealth, that often means taking the time to have meaningful and productive conversations about your goals and wishes.

If you would like guidance in approaching these kinds of conversations, or if you would prefer the meetings be facilitated by a financial professional who is already familiar with your family’s dynamics, our team has the tools and experience you need.

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Eide Bailly Advisors, LLC as a matter of policy, does not give tax, insurance or legal advice to its clients. The effectiveness of any of the strategies described will depend on your individual situation and on a number of complex factors. You should consult with other professionals, as applicable on proposed strategies before any strategy is implemented.