If you are wealthy and have children, you probably worry that your money will negatively impact the development and motivation of your children. Put bluntly, you don’t want your kids to become lazy because they assume that your money will soon become their money. Telling them prematurely may increase the chances of this happening. Keeping information from them may cause resentment and mistrust. When to tell them, and how – these are the tough questions.
Consider Steve, the 28 year-old son of a wealthy business owner, who did not know that his family was wealthy until he reached his mid-twenties. His dad had created a significant amount of wealth in his life, but maintained an austere lifestyle. Steve thought his family was just like all the others in his affluent southern California neighborhood.
I asked Steve how he had learned of his family’s financial status. He said, “I was a 25 year old graduate student in Oregon. My mom came to visit me at the apartment I shared with three other students. Mom didn’t stay long – it wasn’t a nice apartment. As she left she said, ‘I’m going home and talking to dad, you’re getting a different place.’ I said ‘I can’t afford anything better mom; I’m a struggling graduate student.’ She said, ‘You can afford it, we’ll call you.’”
Steve continued, “As you can imagine, that comment intrigued me. I got a call from my dad that night. Dad doesn’t say much, so the conversation went something like this.
‘Steve, it’s dad.’
‘Mom says your apartment is a dump. We want you to buy a house, and yes you can afford it. You do have some money and it’s time you know about it.’
‘How much money dad?’
‘Liquid?’ About $18 million.’
‘Have a nice day, son, talk to you later.’ And then he hung up the phone.”
I asked Steve how this realization that he was a multi-millionaire affected him. His answer surprised me. He said, ‘I sat on my bed in a sort of stunned silence. The first feeling was shock. The second feeling was anger.”
“Anger?” I asked, a bit shocked myself.
“Yes,” Steve answered. “I was disappointed that they waited until I was 25 to tell me. I had done a lot of things by then, earned money to travel around the world, taught English in Asia, volunteered in charities. I just wondered why they felt like that information should be kept secret from me. Why hadn’t they trusted me before that time?”
Steve could have been made aware of his wealth earlier in his life. His parents came to realize this as we worked together. He had accomplished much. He had gained some amount of wisdom. Why hadn’t they told him sooner? I posed this question to them one morning.
In short, they waited out of fear. First, they were afraid that the knowledge would harm him. Second, they feared the discomfort of the actual meeting. They are often unsettled by these types of discussions and put them off for as long as they can.
In our discussion, I added a third reason. In my opinion, they were unaware of the level of maturity Steve had reached while working abroad. Had they established more consistent communication patterns with him, and known what he was spending his time doing, his parents would have made a better decision about the timing of their announcement. By waiting longer than needed, they damaged the trust between them.
What’s the right age to tell them? It depends on their maturity. A better question is – what’s the right time to tell them? Answer: When they are prepared to handle the financial truth. And the only way to know that they are ready is to stay close to them, learn about their lives, what they are accomplishing, how they are spending their time. And then, dear parent, you must make a judgment about their maturity.
Certainly Steve’s case could have ended up much worse. Though Steve was disappointed, and his relationship with his parents damaged in the short term, everything has worked out just fine. Too many similar situations end with long-term damage to relationships and development.
By the way, you may be interested to know how Steve’s money changed him. I asked him how he celebrated his new found wealth. Did he buy a mansion? No, he rented an apartment on his own. Did he drop out of school? No, he completed his degree, a master’s in teaching. Did he buy a flashy new sports car? No, he bought a mountain bike. “But not an ordinary one,” Steve continued. “This one cost over a thousand bucks.”