Telling your children about your wealth

[JOHNNIE36]

My parents were two of the most thrifty people you could ever meet. They married in 1935 and my mother never worked at a regular job after that as she was busy giving birth to me a year later and became your typical stay at home mom of yesteryear. Dad worked his buns off at the shop in the same profession for 47 years. Had a house paid for and about $300k saved up for their later years. They were so afraid of going in a nursing home and having to turn over all their assets. This really bothered them and so they had the house titled in the names of the three kids and started transferring the assets to each of us, $10k every year until it was gone. They just lived on SS and saved a lot of that also. They had a nice retirement but never did a damn thing such as traveling. They were happy, as they thought that's the way it should be, they achieved success and now they were going to kick back and watch the world go by. We kids never had a clue as to what they were worth until they started to transfer the house deed and the annual "gifts". We all had to promise them that we would remain faithful to our wives and husband and that our marriages were on solid ground. It would have killed them if one of split up and some of their assets wound up in the hands of "you know who".
They were really of the old school and the salt of the earth. God rest their souls.

 

[hankster]

Nords said:
I used a line from the Cosby show: "Your mother and I have some money but we have to make it last for the rest of our lives. You, however, are poor."

I love it! Classic Cosby!

When our oldest daughter turned 16, she got this funny idea that we should buy her a car. We lived in a rural area and had an extra vehicle available for her to use sometimes, but a run down '86 Jeep just didn't have the "cool factor" a 16 year old princess deserves.

She probably had seen a bank statement or paycheck stub and knew Dad was fairly well paid. I explained to her the difference between things she had a right to and everyting else. "We will feed you, give you shelter and basic clothing. Sports cars, expensive fashion clothing, etc. are optional items for which you will have to labor. I suggest you look for jobs babysitting, house cleaning or whatever to finance such luxuries."

It must have made an impression because today she is a hard working, frugal wife and mother and she makes her two boys work around the house for their fun money. Our youngest daughter followed suit.

Today, they don't know our exact numbers, but they know where to get the information should DW and I both die in an accident. I'm convinced that our little chat 12 years ago has prevented any chance of an entitlement attitude.

 

[Darryl]

Loved the cosby comment.

Continue to tell kids we have money for basics and they do not need to worry but throw a cosby like "breakdown" when money is spent on impulses. 14 year old recently lobbied for a phone a few times and now understands it's not going to happen. We do talk about saving for their college expenses. We do talk about priorities and choices so they get the concept that the resource is limited. I do hope they see the lack of anxiety about covering the basics. We do discuss family choices about vacations vs toys and give them a vote.

 

[NW-Bound]

The OP was talking about me. No, I am not richie rich. In no way a 4% WR on my portfolio could match our income when we were both working. But since we never spent all of it, early retirement came more easily. We never spent more than we made but our expenses in the last 6 years have been erratic, due to splurges for travels and home improvements as I suddenly realized that I would not be able to take it with me. It varied greater than 2.5 to 1 from year to year! We've got to be careful here, and must get back to the old LBYM mode until we are out of this economic quagmire. Easy, easy...

Regardless of the size of your portfolio, if you FIRE'd, the fact that you are not working when you "should" raises a flag already. And your children surely would wonder, as they compare themselves to the neighbors or their friends.

My children, besides their age of 20 and 23, are not as financially mature as I would like to see them. I don't want them to act snobbish, or thinking that they would be entitled to more. I will tell them when the time is right. We have only told them that we should not have to worry about necessities, but the lack of work income means that big ticket items must be carefully rationed, and that a lot of reserve must be maintained. They know next to nothing about investing, and have little interest despite my attempts to educate. Perhaps I did not know the right approach, although I preach to them constantly about the LBYM's philosophy. My son does show an LBYM attitude, but my daughter really got me worried the way she spends the money she makes.

About myself growing up, I knew my parents were LBYM'ers when I was older than 10. I didn't know then how much money they had nor their exact income, only that they had some savings, but not so much that they could stop work. I also knew that they recovered from a personal black swan event before I was born. Their frugal way helped again with a second black swan event, this time when I was in my late teens. They recovered once more, but were not able to reach the earlier economic status.

Only when we were all in our 40s and established, and my parents already retired, that they told us about their assets. At that point, all of us children had the same level of assets or more. I was not surprised when I learned, as I was able to picture it from their more modest income level. I also have been doing their taxes since then. After my father passed away, my mother had my brother as a joint account holder in some accounts, me in another, in case our access is needed. I hope to be able to trust my kids similarly in 20 years.

 

[Urchina]

Until I turned 17, my total knowledge of our family's finances were:
1. We have enough for all the things we need and some of the things we want.
2. There is a budget and all purchases must fit within it.
3. Buying quality items and making them last is something we do.

When I turned 17, we filled out the Federal Application for Student Financial Aid and I, for the first time in my life, saw what my parent's income was. It did not make my head spin.

It did make me realize that you could have a comfortable, charitable middle-class life, with pleasurable extras (riding lessons, piano lessons, a year as an exchange student, family vacations, help with college) on one salary by prioritizing and sticking to a budget.

As an adult, I still don't know my parent's income or total financial picture, except that they've been diligent about savings and will be fine in their retirement. My dad retired "early" last year at age 59.
They are beginning to discuss where their money is, when the house will be paid off, etc. with me because my brother and I are co-executors of the will.

So I guess... my parents didn't keep our finances a secret, but what they talked about was how to budget, how to shop frugally, how to find quality items and care for them. They didn't talk about how much Dad made, or what the house was worth. When we talked about money, it was about the nuts-and-bolts of how to deal with it, not how much would one day, maybe, be theirs or mine. It was a very practical way to transfer knowledge and skills without exploding my teenage head.
Truthfully, I really don't care.

 

[Rambler]

I've given my kids (22 and 18) a general idea of our income, but I have done so because we have been so fortunate, and I do not want them to automatically expect that they will also be so fortunate. I also want them to know that the only reason we have some of the things we have, and can do some of the things we do is because of that such good fortune. Even with the good fortune we enjoy, the kids have sometimes wondered why we don't have more "things" and "go on fancier vacations to more exotic places" like most of their friends. I explain to them that while I don't know the particulars of "so-and-so's" dad's salary, I do know that for them to be able to do the things they do, they would have to be spending just about everything or incurring debt to be able to do them.

The kids also know that we want to retire early and enjoy our lives a little more. I have not gone into a lot of detail about it, but I have been trying to begin their education about preparing for a rainy day and investing for the future. They have a general picture of what we have but they have been informed that what we have is for our retirement.

When I was in my teens, I knew what my folks had, and I was proud of them for being able to save that much on dad's salary and the little income from the farm we had. My sister on the other hand could not understand why they were driving a used Volkswagen bus instead of a caddy. We were both brought up the same way. Unfortunately her attitude about money never changed and she is today broke and bankrupt.

Once a year, I go thru a file with my dad that outlines what they have and where they have it, just in case. Above noted sister no longer has a clue about their assets. I will be the same with my kids in due time. If they are responsible with their own assets they will know details. If not, they won't.

R

 

[Trek]

I think when she gets a Ferrari for her 16th birthday she'll have an idea already. Oh wait, that was an MTV show. I mean, when I give her a handful of bus tickets, she'll have a good idea what we're worth.

 

[Michael Moore]

Since I avoided the whole issue by not having children I can't address what to tell them first hand. When I was growing up I knew we were middle class and how much the family home cost when purchased, but I had no idea if it was still being paid off or more than a rough idea of my dad's salary.

How are people dealing with the subject of "great expectations?"

A few years ago my sister (5 years younger, now early 50s) went back to school to get a degree and had to take out about $20K in student loans to make that happen while she was working and with two minor children at home. A while back I was talking to my mother and she told me that since she'd had a CD mature she paid off the student loan so that when I act as her executor I can deduct that from my sister's share of the estate.

I appreciate that she was trying to be fair, but I told her that her money is her money and she can do with it what she wants (though I'd prefer she not give it to some televangelist but that wasn't likely anyway). If she wants to leave all her money to the local humane society (she's sure not the type to spend it on riotous living) or make some big gifts to charities while she's alive that's fine with me. My folks did their part putting me through school and making a couple of small loans (and I signed a note and paid them a moderate interest and I'd recommend that when people loan money to their kids/relatives) when I was getting set up on my own, so I don't expect her to hoard her money just to leave it to me and my sister.

But I see people who do seem to feel driven to deny themselves to pass on an inheritance, and there are people who seem to feel entitled to inherit their parent's money even to the point of making it clear that the parents ought to not be "squandering their inheritence" on themselves.

cheers,
Michael

 

[clifp]

I knew quite a few kids of rich parents (>10 Mil.), it seems to me that those who had a good idea of their parents net worth, had less issues with money than those who were basically clueless. So I think openness is the best policy.

Even if you choose to keep your kids in the dark about the details of your financial situation. I think it is very important that parents let their adult children their financial situation in some detail, or at the very least a place where they can easily and quickly locate an list of statements in the event of their death or incapacitation. None of us are immune to a sudden accident or incapacitation or dementia and there plenty of sharks in the world, just waiting to devour our hard earned savings. The situation with my grandfather is instructive.

My grandfather was very financially savvy man and carefully set up a trust to minimize estate taxes. The Adventist Church was select edto be the executors. He lived to the ripe old age of 96, and was very fortunate to still be mentally sharp up until the end.
After his death my grandmother in her 90s developed Alzheimers, and died several years latter. During that time one of the church's trust officer left the church, befriended my grandmother, and proceeded to loot the estate. In the later legal proceeding we documented her paying off his mortgage for 350K, and making a $100,000 donation to a "charity", his family had set up. In all roughly $500,000 was certainly stolen.

My grandfather had told my mom and her step sister that "they would be taken care off", but they never really had any specifics inf on the amounts. My grandfather and I were very close, so he was comfortable with me helping him out with Quicken. Judging from what I saw in Quicken, a year or so before his death the estate was $3+ million, although 1/2 of that was in rental properties in LA. The total disbursement from the estate spread among twenty odd heirs with my mom and my aunt with the largest share was less than million. So the gap between what I thought the estate was worth and what we accounted for by expenses and theft was well over a million. The church and we settled on amount roughly splitting the difference between what their former employee stole. So without an accurate financial picture of my grandparents finances before death and Alzheimer's we will never know how much the family actually lost much less be able to prove in court.

Nor do I think our situation is particularly unique. Probate is pretty mysterious process to most of us. (Ok maybe not Martha) . Many of us have financial advisers, brokers, CPA, lawyers etc. who have some access to our financial records. We could also be the victim of identy theft shortly after our death (there are hackers who specialize in going after sick and elder) Most of also have enough money they were worth ripping off.

Even if your intention is to leave a million dollars to the humane society, I think it is worth your kids know that is your wishes early on, because otherwise their will always be some suspicious among your kids that nice lady at the humane society wasn't just being nice to mom out of the goodness of her heart.

Personally, I every time I hear the story of 90 year old dies leaving an estate worth X millions, much to the shock of her kids/relatives, donates 2 million to such and such charity. I always wonder did she really die with an estate of X+Y millions with Y finding its ways into other peoples hands.

 

[Rustic23]

Our 13 year old grand daughter ask us the other day. 'If you all don't work, where do you get your money?' Her mother answered, 'Remember saving for a rainy day? Well that rainy day is Retirement.' That answer seemed to suit her just fine. I don't really think either our daughter or son know how much we have, but they know they should not have to worry about us. Interesting, DW's father passed away a couple of months ago. When they started looking at his bank accounts, they found he had over $200,000. All four siblings had the same reaction "Who uh thunk!" Once more they knew he did not like for anything, just no one ever bothered to as how well off. As for you kids, my guess is, unless you make a big deal of it, they will never ask. I will bet they will be more concerned if they get what ever it is they ask for next and not worry where you get the money to give it to them.

 

[WhoDaresWins]

I don't consider myself "wealthy" compared to many of my peers. I plan to give my 26 year old son(my only child) copies of all my investment statements soon. He appears totally disinterested in anything I have. He is finished with college and launched on what I presume is a fairly lucrative career(engineering and MBA degrees), and as he is temporarily employed abroad(London), is somewhat removed from my day to day life where discussions relating to my estate planning might occur as a natural conversational sequence. We mostly discuss what we are reading, movies, plays, travel, restaurants, cooking, etc. as they are certainly more felicitous topics. He has given me investment books to read but is openly averse to giving me any advice relating to my estate or money management. Just tells me to read more, make my own decisions, and quickly changes the subject.

 

[FUEGO]

The OP was talking about me. No, I am not richie rich.

I admit it, you are the "other poster" I referenced in my OP. Not trying to imply you are overly rich or anything! Just wealthy enough to do what you want to do.

 

[nvestysly]

It Depends... Details Are Likely Not Necessary

There are some very good ideas in this thread. My wife and I don't have children but we both have loads of nieces and nephews. And we have the situations we experienced as children.

From my vantage point I think discussing money, how to make money (work, investment, rental property, etc.), and how to use your money wisely are all good discussions particularly when the child is young. Give them a copy of The Richest Man In Babylon - that book is good even for children. When the appropriate time comes make sure the children understand borrowing (and loaning) money. Make sure they understand there is more to life than money. Even as the children become adults I don't think discussing details is necessary. You know your children very well but money (particulary large sums of money) can sometimes cause people to do strange things. So I think keeping it somewhat vague like the quote below makes sense for most situations. Give them a copy of The Wealthy Barber when they graduate from high school or college.

1. We have enough for all the things we need and some of the things we want.
2. There is a budget and all purchases must fit within it.
3. Buying quality items and making them last is something we do.

I'll add that it is very important for adult children to know sufficient details about your finances so they can access the necessary information for emergency situations. Even then, a simple list of account numbers, contact information, etc. is all that's needed. Keep it in a safe place and let them know where to find a copy.

 

[mickeyd]

I've advised both of our adult kids that they will split the "left overs" 50/50 but not to expect much as Mom and I plan on living a long time and are in excellent health.

DW may have tipped her hand and gave them a hint at the current amount (a few years ago) because she thinks that we are rich and will never be able to spend it all. Gotta' love that gal!

 

[donheff]

We are pretty straight forward with our kids. We don't share the specific numbers with them but they know what my pension is, house values are common knowledge and they understand how hard we saved. We also talk all the time about the importance of the FI component of FIRE. DS (now 35) has finally fully realized the LBYM outlook. DD (23) is just out of college and starting teaching. She is about as mature as I was at her age but I hope she will follow the typical female trajectory and mature more rapidly that DS and I did over the next few years. Both of them seem to have a healthy respect for the need to save and the value of financial independence. I suspect they hope Mr Market works out in such a manner that we will leave enough of an estate to smooth out any late life bad luck financial bumps they may encounter but if DS' actions to date are an indicator - they are not relying on such a bail out.

 

[NW-Bound]

Not trying to imply you are overly rich or anything! Just wealthy enough to do what you want to do.

No, I knew. I was just joking.

Anyway, none of the things that I want to do requires that much money or is beyond what the common man typically wants. I just have a very short list, and it gets even shorter with this economic downturn.

I try not to have to worry about having an empty glass by simply having a small glass. See an attached picture of it.

Heh heh heh... And as my taste buds have degraded with middle age, I have been able to refill that glass with cheaper bottles and not being able to tell the difference. Heh heh heh...

 

[haha]

When my olderst son was a kid he helped me make a lot of C++ programs to monitor my investments, as well as a general ledger program. So he knew exactly what was going on. However, his interest in money per se is minimal. At this point he is much better off financially than I am, so I doubt he gives this topic any mind.

My youngest son I think realizes that with no pension, only Medicare for health ins, and fairly high living expenses there is a lot of insecurity about final values for my estate. I think they both will be very happy if I (and their mother) manage to stay independent and OK. They are and have always been very self-reliant men.

I definitely believe in pasing any wealth I do have along to my children if I have any to pass. From what I have seen of the way charities, university endowments, etc run roughshod over donors' wishes I would sooner burn my money than give it to them.

Ha

 

[Grizz]

Hmm, kind of in the minority here on this, but my 12 yr old daughter knows our current net worth.

The reason that she was made aware of it is that in explaining why we live a fairly cushy lifestyle as a family (education, entrepreneurship, investments, home ownership, huge amounts of luck) compared to most of her friends I thought it important to let her know that prior to her birth and up until she was about 5, that there was no way that we could have afforded the money to go on (or take her on) yearly Caribbean vacations, and cruises, or to afford a lake lot with ATVs and Sea doos etc. because our net worth was $.....(a small fraction of today)

She knows to keep the numbers to herself, and I am very confident in her in that respect.

We live below our means, but currently our means are fairly high. I won't live counting pennies if I don't have to, but I worry about the potentially ugly tradeoff of having my daughter become accustomed to this lifestyle and not know what it is to wonder what to cut back on in order to buy groceries. Trust me, when she goes to college she will find out, but despite my highly entertaining speeches, scary things like inability to budget, no appreciation for Walmart, and runaway credit card debt worry me.

 

[Orchidflower]

This just came up in our house the other day. Grown son says I never told him anything and kept him in the dark while he grew up, which was done so that there would be zero chance of him repeating anything about personal affairs to anyone. He is a tad resentful, but seemed to understand the necessity of this. Plus, why would I ever want to make my child my confident in these matters when he was little? I really strongly believed in separation of parent and child as a single parent or, in other words, my goal was not to be his friend but his mother.
He hasn't asked for an advance, and, at this time, feels he is old enough and competent enough to take care of himself. Or I hope so, anyway.
He always had most everything he needed, but I always let him realize that money didn't grow on trees yadda, yadda, yadda so he wouldn't think we had much anyway. Pretty traditional childhood probably. Plus, I always made sure I worked mostly from home, so he definitely understood that Mom had to work hard for everything we had. Good lesson in some ways as he has worked long hours from his first jobs and never insisted on working only until 5 pm.
He doesn't seem too scarred at this time.