Bridging the gaps in family conversations about money

A multigenerational family walks along a wooden path on the beach

Your long-term plan for your finances should include honest discussions with family about money. Here’s how to do it.

Arne Boudewyn, WELLS FARGO
Arne Boudewyn
Advice & Planning Director, Wells Fargo
Wealth & Investment Management

I often tell our clients that family conversations about money are important opportunities, but I know that they might use a different, more negative description. Younger generations in families of means can be hesitant to ask questions about money, and older generations often put conversations off as long as possible so that their children and grandchildren do not feel overwhelmed by the responsibilities they may one day shoulder.

My team at Wells Fargo and I often help families break down these kinds of barriers around talking about multigenerational wealth. What have we found? Sometimes, learning that both age groups have concerns is reassuring. And so is hearing that all families who create wealth will eventually need to deal with this kind of situation.

Our suggestion is to have proactive, progressive conversations with younger generations — sooner rather than later. In fact, we suggest starting earlier than you think you want to. It doesn’t mean that you have to share all of the details of your wealth with a teenager, but you can start to educate them about the architecture of what you’ve created.

Let’s look a little deeper at how you can do this and some practical examples from families I’ve worked with. (And if you think your family could benefit from working with my team, reach out to your wealth advisor at Wells Fargo.)

Three ideas to create fruitful conversations about wealth

Build conversation with questions, not statements. Older generations need to resist the temptation to craft a lecture, or give top-down advice. That can be intimidating and ineffective. And younger generations need to resist listing the differences between themselves and their parents and grandparents. That sets up conflict from the very beginning.

Instead, use questions, including questions about money values. There’s nobody I know who doesn’t want to talk about the values that are important to them.

  • A great opening question for young people to ask: “How was money discussed when you were growing up?” This question often leads the family member to think about their own parents or grandparents, and the values that were passed down from one generation to the next.
  • An opening question for parents to ask their children: “Are there things about our family’s wealth we haven’t discussed that you are curious about?”

Break the assignment into pieces. Trying to accomplish everything at one time is overwhelming. I advise families to look at three categories of financial learning.

The first is the financial fundamentals — earning and spending, saving and managing money, and giving. I’ve seen some really great tactics with families I’ve worked with.

  • For earning and spending: One family’s daughter, an avid softball player, had her eye on a premium bat. Her parents challenged her to save half the price, so she had to determine trade-offs of how she spent her allowance and how to bring in income to reach her goal.
  • For saving and managing money: Another family I worked with had each of their three college-aged kids manage a $15,000 investment account. They could ask questions of the family’s financial advisor, but their main charge was not to lose any principal. The parents added, “In case you haven’t noticed, we’re pretty successful financially. We aren’t going to look over your shoulder, but if you have any questions, feel free to come to us.” I loved that.
  • For giving: Many families set aside a portion of their charitable giving budget for younger generations to disperse, whether through a foundation grant or a direct cash gift. (Younger kids usually choose a cause related to animals, by the way.) You can have them present their proposal to the family or have them engage in activities like researching a nonprofit’s financial health or mission.

The second category is financial resilience and grit. This takes the form of real-world practice, of creating a plan and sticking to it to reach a goal.

The third category is what I call financial firsts — first phone, first job, first apartment. You can use each milestone as a time to prepare for new responsibility, foster good judgment, fill in any knowledge gaps, and have a good two-way discussion. These financial firsts arise across decades, and in families of means, they warrant clear communication.

Look again, and again if needed, to build a plan for stewarding your family’s wealth. I recently got an update on a client family with an over 100-year-old business. Six or seven years ago, I talked to the current leader of the business, and the assessment was that none of the next generation had the leadership skills needed to take over. Today, one of the children is the CEO and has grown it to be an international company, with average growth of 15% to 20% each year.

In the end, what led to the change was the willingness to have open conversations around their concerns, as well as to reevaluate the talent in their family. I also remind families not to discount the talent that marries into their family. They may not be blood relatives, but you could be losing opportunity with all the talent that’s sitting at your family gatherings.

Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company.