Wednesday, August 28, 2019

Should the rich avoid discussing their wealth with their kids?

I've never understood that idea, and this New York Times piece convinced me there's no good reason for it:

Parents would be remiss if they did not talk to their children about drinking and driving, using drugs and, of course, sex. . . . So why do a significant number of parents still not talk to their children about wealth and inheritance?

Two-thirds of Americans who have at least $3 million in investable assets have not talked to their children about their wealth or never will, according to a Merrill Private Wealth Management study of 650 families.

Some in the survey said they did not bother because they assumed their children had already figured it out. But 67 percent had quietly made gifts in a trust or set aside money in their children’s name. . . . Ten percent steadfastly refused to talk at all with their children about money, saying it was no one’s business. . . .

In a world of oversharing on social media, why does this restraint persist? It’s complicated. . . .

The most common reason cited for not talking about money is that parents do not want inheritance to rob children of motivation. So if a parent does not say anything, a child will never figure out the family’s wealth. Impossible.

Children are well able to use computers and mobile devices to determine just how much their house, car and vacation cost, along with their school fees and the salaries of any household help. Information about prominent parents and families is flowing to their children’s friends as well.

“A second-grade kid, because they go to all of these house parties, will be able to rank the wealth of all the people in his or her class pretty accurately,” said Dennis Jaffe, a psychologist who works with wealthy families. “It’s not positive or negative, and they’re not jealous yet. But these are teaching moments about values.”

This challenges the notion that waiting until children are older is better. By then, they will have formed their own views on wealth by watching their parents.

“Values are set by everyday behaviors when you’re growing up, and kids are watching you,” Mr. Jaffe said. “Entitlement education begins in nursery school, not when they’re 25 and come to you and say, ‘I need some money.’”

The strategy of ignorance exposes a disconnect between a parent’s stated reason and real reason for saying nothing, said Matthew Wesley, a director at Merrill’s Center for Family Wealth and a co-author of the study with Ms. Allred.

“The stated reason is, ‘We don’t want money to screw up our kids, and if we disclose our wealth to them, we’ll derail their career paths,’” Mr. Wesley said. “The deeper reason is about fear and control — the fear to relinquish that control and the deeper psychological issues around money.”

Disengagement creates more problems, though, because it can create a perception that a family is more, or less, wealthy than it really is. Leaving children to guess can also create feelings of insecurity.

Some parents shy away from talking about wealth because they have decided to give away most of the money.

“That’s great, but if you’re not telling your kids, that’s weird,” Mr. Jaffe said. “If that’s what you believe in, why wouldn’t you tell your kids that ‘we’re a very wealthy family, but our values say we’re going to put most of it into a philanthropy, and we’re all going to work and do something on our own’?”