Clients often ask, “When is the right time to talk with my children about wealth?” Truth be told, there is no one right answer to this question. Many parents are uncomfortable sharing information about their wealth with their children out of fear that such knowledge may stifle a child’s ambition or willingness to work, concern that children will share this information with others, or simply because they don’t know how to best broach the topic. However, it’s important to remember that the better you prepare your children for the wealth they will one day inherit, the greater the likelihood that they will have the skills, education and values to appropriately manage the wealth for themselves and future generations.

In starting this conversation with your children, consider CIBC Private Wealth’s three guiding principles for discussing wealth with the next generation:
• Provide age-appropriate transparency
• Create a learning environment
• Encourage opportunities for involvement

Principle 1: Provide Age-Appropriate Transparency
Your children may know more about your wealth than you think. Many items that indicate wealth—for example, the value of your home, your job title/position, the company you work for, the gifts you give or vacations you take—can often be valued or monetized online. Even younger children can recognize their relative wealth based on the size of their home, the schools they attend or the benefits available to them. Accordingly, providing age-appropriate transparency can help put your wealth into perspective and begin conversations about what it means to earn and maintain wealth.

Age-appropriate transparency does not necessarily mean sharing financial statements with your children—unless you want to. Instead, transparency is more about providing guidance around how to think about wealth and how wealth is earned and maintained. When the time is right, it is also about educating the family on your estate plan and your expectations and wishes for how the money will be used.

Some steps to provide age-appropriate transparency include:
• Discuss the type of work and discipline that is required to support the family and the family’s lifestyle. This can be a great primer, even for younger children, to understand what it might require to sustain or build a child’s own wealth.   

• Explain what you expect to provide in terms of financial support as your children start to gain more independence, and what you expect your children to contribute themselves. This type of discussion can provide important insights as to future expectations. For example: 

• Is an allowance contingent on helping around the house?
• Is your child expected to work in high school or college? 
• Are there any expectations for grades or other contributions if you are paying school tuition?  
• Will any support be provided once the child is no longer living at home and, if so, are there any requirements to receive this support?

When the time is right, provide transparency and education around your estate plan to offer additional opportunities to discuss values about wealth preservation and vocalize your expectations for how the wealth should be used. If you also plan to name a child as an executor or trustee (or co-fiduciary), these conversations can be critical to helping a child make important decisions related to these positions.  

Principle 2: Create A Learning Environment
To help better prepare your children for wealth, create a learning environment where financial planning essentials and investment fundamentals are modeled, discussed and taught. There are lots of ways to do this, but consider some of the following ideas:

For younger children: Having money in hand is a good way for children to begin a financial education, whether it’s received through gifts, an allowance or the neighborhood lemonade stand. Talk to them about what they can do with this money, and introduce the idea of savings. 

• Encourage your children to save a regular amount of their money in their piggy bank, because it helps children develop financial discipline. 

• Incorporate the “rule of three” by asking your child to divide money into three categories: saving (for longer-term goals, like a new bicycle), spending (for short-term wants, like a toy) and giving (for someone in need or a contribution to a local cause). 

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