Even rich families don't talk money

When I was growing up, the family finances were a closely held secret. I had no idea what my father made, or how our family budget was balanced. When I had to fill out financial aid forms for college, my parents did their part last and I never looked at it. I knew that topic was off-limits.

Turns out that's pretty typical, even for high-net-worth parents -- that is, ones who don't need financial aid forms. Most wealthy parents have strong opinions about how their children should use the wealth they will eventually inherit, but most wait until their children are adults to communicate those ideas, according to a recent survey from SEI Private Wealth Management.

The survey of more than 100 individuals from families with more than $20 million in assets, conducted by independent research firm Scorpio Partnership, found that only 36% of wealthy parents have discussed their wealth and its implications with their children before the age of 21, and only 16% discuss it with children younger than 16.

"The survey results point to a growing wealth communication breakdown in high-net-worth families -- one that many believe is inhibiting the ability of future generations to sustain long-term wealth," SEI said.

Results of the 2011 U.S. Trust Insights on Wealth and Worth survey (.pdf file), released earlier this year, support those from the SEI survey. U.S. Trust found that 52% of parents had not fully disclosed their wealth to children, and 15% had told them nothing about it. Though 31% of the latter group said they had never thought to do so, others said they feared the knowledge would make their children lazy (24%), cause them to make poor decisions (20%) or let them be taken advantage of by others (13%).

Most parents in the U.S. Trust survey said they believed their children would not be able to adequately handle their family money until age 30 or older. Of these, 22% said their children would reach financial maturity by age 30, 51% said between the ages of 30 and 40, and 25% said at age 40 or older.

However, the study -- based on a nationwide survey of 457 adults with $3 million or more in investable assets -- also found that 49% of parents did not feel it was important to leave a financial inheritance.

Talking about money pays off

Communicating with children about wealth has positive results, the SEI survey found. Of those who involved their families in their financial interests, 43% described the experience as "fulfilling or liberating," though 39% called it "challenging, frustrating, or uncomfortable." Post continues below.

Family money advice for the wealthy

"It is important not to wait until the kids are in their 30s or 40s and are not prepared at all to receive the wealth," wealth psychology expert Kathleen Kingsbury, founder of KBK Wealth Connection, told The Wall Street Journal.

Some advice from SEI about talking to kids about family wealth:

• Start early. Though your initial conversations may not be detailed, it's never too early to start talking about the topic.
• Initiate the conversation. Don't wait for your kids to bring up the subject, because they might interpret your silence on the topic as meaning it's not up for discussion.
• Communicate your values. If you talk about the family's wealth and how you want it used, your children will learn to develop their own values.
• Make it an everyday topic. Don't confine conversations about money to formal, scheduled meetings, but instead put the issues into practical real-life contexts. Have casual conversations about money when you are paying a restaurant check or reviewing your investments.
• Don't lecture. Let your kids ask questions and voice their concerns and opinions. They are more likely to open up with you if they can tell you are really listening to them.

Given that we weren't part of the 1%, I suspect my family's lack of financial transparency wasn't critical in the long run. But I would have expected more information if I'd had "high-net-worth" parents. Surely they would have wanted to prepare me if I were going to someday manage their millions.

What's it like in your family? Do you share information about the family finances with your kids -- or do your parents share with you? Do you think it's more important -- or less so -- if you have more at stake?

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