Hillel Presser, an attorney and businessman/entrepreneur based in Boca Raton, Florida, started teaching his son the basics about earning and investing money at a young age.
“When my son was 4, if you asked him, ‘What do people do every day?,’ he would say, ‘You go to the office,’” Presser says. “What do you do there? ‘You say hi to everyone. Then you work and get money.’”
The next step, his son could tell him, was to buy a building with that money: “‘Because you let people use it and they give you money.’” And with that money: “‘You buy another building.’”
This type of conversation illustrates one way parents can start to teach their children about money early on. Although detailed conversations about trusts and inheritance are more likely to resonate with older children, even young children can start to learn financial basics.
For wealthy parents, these issues can be particularly fraught: When — and how — should they tell their children about their wealth, especially if the children will eventually inherit a significant amount? How can they ensure that their children are equipped and motivated to support themselves, even if they may never need to?
Experts say parents should start by clarifying their own thinking about money. Then, they can use a number of strategies to teach the lessons they want to impart to their kids about wealth and how it fits into their values.
Decisions for parents
Among the first questions parents confront are how much to tell their children about the family’s wealth, and when to tell them. Parents may want to start by thinking about their own money history: what messages they received growing up about money, and from whom, as well as their early experiences with money.
“Most people are going to parent the way their parents did, because that’s what they have observed and are most familiar with,” says Drew Egan, director of family education for the Center for Family Legacy at Truist Wealth.
Someone who grew up seeing parents fight about money, for example, may emulate that behavior as an adult. The same goes for children who grow up in a family where money is never discussed. A child who was raised in a home with a big emphasis on saving money and delayed gratification, on the other hand, will likely pass similar messages on to the next generation.
As for how transparent parents should be with their children about the wealth they will inherit, there is not always a clear answer.
“Some parents have been able to really reflect on what’s important to them and have decided it would be healthy not to tell their children about the money at all. Others tell them everything as early as they can,” Egan says.
In this way, it is similar to decisions about how much money to give children: “Find that balance between telling them nothing and telling them everything — that balance between giving them nothing and giving them everything,” Egan says. “Usually the right answer for parents is somewhere in the middle as opposed to an all-or-nothing approach.”
Lessons in financial literacy
Once parents know their general philosophy, they can use a number of different strategies to teach their children about money. Presser’s conversations with his son, for example, reflect his goal of making sure his children are able to support themselves.
“Money can be lost, so you need to know how to make it,” Presser says. He also reads books on children and wealth, such as Rich Dad, Poor Dad.
Although it’s possible to hire professionals to teach children of all ages about money, many lessons can be imparted in more casual contexts, especially with younger children.
“There are everyday teachable moments with children,” Egan says. “Money can be used to teach life principles, and life principles can influence our choices with money.”
One of these principles, for example, could be the ability to delay gratification — an important skill that is applicable to many life goals, not just financial ones.
“You can teach about discipline and delayed gratification by using principles of dollars and cents: Here’s an allowance — set some of it aside so you can buy that toy you really want,” Egan says. “They learn about delayed gratification and the value of savings, and they feel a sense of ownership and satisfaction knowing that their choice to save led to reaching their goal.”
Parents may also convey lessons about money by being open about their own spending, though different people will come to different conclusions about how specific to be.
“Some parents explain, ‘I made an investment today’ and talk about the concept of putting money to work,” Egan says. “Some explain that it’s important to pay your bills on time: ‘I just paid the electric bill, which cost $190. That’s money we can’t use to buy ice cream, but it’s important to pay so we have electricity in our home.’”
Placing money in a broader context
In the end, teaching children about money is just one part of a broader conversation. For Chris Shonk and his wife, who have two young children, lessons about money are placed in the context of a family mission statement and three guiding principles for the family: laughter, love and learning.
“Regardless of who we are or what our station in life would be, these principles don’t change. Whatever financial resources you have or whatever position in society you have — if what you do and what you believe doesn’t change, then you are probably living a life of authenticity,” says Shonk, a tech entrepreneur and investor based in Crested Butte, Colorado. “Anything that’s too complicated doesn’t really survive or scale. We wanted to have something that stripped out all the noise and went to our very core fabric.”
The goal is for the children to understand their finances but not have money overshadow the rest of their lives.
“Do our kids know that they’re in a good spot and can do a lot of interesting things? Yes,” Shonk says. “But the rest of my family, they’re military, teachers, first responders. We’ve tried to be very conscious about telling our kids, there is no preconceived notion around what you need to do. The only thing you need to do is to be yourself and be a good human being and do things that make you happy while making a positive impact on the world.”
