Helping your clients talk to kids about money

While discussing wealth with children may seem daunting, there are different actions you can take at different stages of life. 

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“Parents with wealth often struggle with how much to disclose and when to disclose, and when they should start talking about plans for their estates and the future transition of wealth,” said Susan Wood, director of wealth strategies at CIBC Private Wealth.

For parents who have younger children, Wood recommends “planting the seeds” about the family’s values around money.

“It’s a good time in these early years to start talking about money, about family values around money and to start building financial education and fluency,” she said.

One way parents can do this is through an allowance, though Wood recommends parents break it down into three parts: money spent, money saved and money that can be given away.

“Having those three different parts allows financial fluency to build,” she said.

When it comes to teenage children, Wood said parents should start to set expectations for the wealth they may or may not receive.

“It’s OK for kids of this age who have some maturity, some financial fluency and a healthy relationship with wealth to understand that the family has some wealth,” she said. “We owe it to our children to offer some transparency about our intentions for the family wealth as they get older.”

Without it, they could start making assumptions, she said.

Wood said parents should avoid supporting children too much in their career-building years to encourage them to make their own money. 

Lastly, once children become adults and have started making their own estate plans, it’s important for them to know their parents’ wealth transition plans, Wood said. A named representative should be made aware of the estate plan. 

“I believe that full transparency is warranted at this point with very few exceptions,” she said. “Adult kids need to know that so they can plan accordingly for their own estates and be as thoughtful as possible.”

Facilitating the conversation

Advisors can support clients through these stages simply by having a conversation and getting a better understanding of their intentions. This could also open the door for an advisor to build a relationship with a client’s children. 

When a client wants to share specifics with their family, Wood said advisors can help by hosting or attending that meeting. Having an “outsider”can be beneficial to facilitate or manage family dynamics, she said, though the client should lead the conversation. 

If a client prefers to have a discussion without an advisor present, Wood said advisors can still help them prepare by providing visual aids, putting a balance sheet together or even offering a suggested agenda. 

This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.