Passing the Torch: When is the Right Time to Share Your Financial Picture?

Passing the Torch: When is the right time to share your financial picture?

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In 1810, Cornelius Vanderbilt, then age 16, borrowed $100 from his mother, bought a sailboat, and opened a ferry service from Staten Island to Manhattan.  When he died 67 years later in 1877, he left behind an estate of $100 million, which represented $1 out of every $20 in circulation in the United States at the time.  That's the equivalent to $215 billion in today's dollars, nearly twice that of Amazon's Jeff Bezos, currently the richest person in the world.  

Fifty years later, not a single Vanderbilt was found among the richest in the U.S., and one of his grandchildren died penniless. 

This is often held up as an extreme example of the proverb "shirtsleeves to shirtsleeves in three generations."  It's a bit of an exaggeration, as the family still owns the Biltmore (the country's largest privately owned residence) and the Commodore's great-great granddaughter Gloria Vanderbilt maintains a sizeable net worth at age 90. 

But the majority of the estate was frittered away, and the story of the decline of the family fortune does indeed fill a book, titled Fortune's Children: The Fall of the House of Vanderbilt by Arthur Vanderbilt II. 

It is clear from the story of Cornelius Vanderbilt's life, as well as that of his heirs, that communication about family money was not a strong suit.  Nor are they alone, as a Wall Street Journal article from 2013 highlighted research showing that 70% of wealthy families lose their wealth by the second generation.

A recent article in the Wall Street Journal highlighted a question that has come up in a number of client meetings over the past few months:  When is the right time to share family money details with your children?

According to the Journal, "Discussions about family money are especially important these days given that financial professionals estimate that tens of trillions of dollars in financial and nonfinancial assets will be passed from baby boomers to their heirs over the next several decades."

Kathleen Burns Kingsbury, author of the book Breaking Money Silence, shared results from a recent survey that revealed that 44% of Americans find it more difficult to talk about money than to talk about death, politics, or religion. Clearly this is a conversation that does not come naturally to many of us. Our firsthand experience at AFM runs the gamut, from clients who bring college age children into annual review meetings in our office, to clients in their 80's who aren't yet comfortable sharing specifics with their adult, middle-age children. The Journal article suggested some age appropriate strategies, which we think form a sensible guide for what to share when.  One key point that was left unspoken in the article - sharing information does not mean "sharing the wealth." 


Before College

A key first step, when kids are still too young to understand the full picture, is to start the conversation with family values surrounding money.  Beginning with a story about family history, starting with grandparents or great-grandparents, can help ground conversation in something tangible.   According to an article in the Harvard Business Review, "frugality, budgets, saving, generosity, use of debt, and entrepreneurialism" are all examples of topics that lay the groundwork early on.   One of our favorite books on this topic, with advice for parents of children up through high school age, is The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber.


While in most cases there's no urgency to share specific numbers with children in their twenties, it's a good time to start a conversation about the basic framework, and basic estate plan, particularly if the children may have a role to play as trustee or executor.  The mid-to-late 20's is a good time to introduce them to us, so that we can help lay their own groundwork surrounding financial planning, goal setting, 401(k) plans, etc.  


Once children reach maturity, and perhaps are starting families of their own, then it can be a good time to discuss your plan, and to begin to share specific details about your wealth.  How you approach this depends on the child, but one way to broach the subject is to lean on us, and have AFM facilitate a family meeting. We have held family meetings that are free-form discussions focused on the children, transitioning to discussion of the parent's intentions for inheritance, help with a new home purchase, or college funding.   We've also held more formal meetings with a preset agenda and walked through parents’ estate planning, taxes, portfolio and investing philosophy, and expectations.

40s and beyond

In their 40's and into their 50s, in most cases it is crucial for children to have a basic knowledge about the family finances. The less they know, the greater the anxiety they have about what the future holds for their parents, and whether or not they may be called to help the parents financially down the road.


There is no one size fits all answer for what to share when.   The most common concern is that children, particularly earlier in life, will become entitled, and that withholding information will help build a motivated and financially savvy adult.   But the unintended consequence is that those who had limited communication with their parents about money “later in life feel ‘clueless,’ as if they don’t truly understand how…money management works.” (WSJ, 2/2/15)

If you are among the 60% of our clients who haven’t held a family meeting, please consider starting the conversation this year.  If the task feels awkward, daunting, or if you’re unsure where to start, lean on us!   Whether it’s providing an agenda or topic list, or holding a meeting here in our office with your children, please don’t hesitate to ask us for help.


Presented by Chris Rivers, CFP®

2017 Chris