The money taboo: why it’s important to have the money conversation with your children

Money and stress go hand in hand. In a recent Charles Stanley survey 42% of high-net-worth individuals (HNWIs) said they were stressed about their financial situation some or most of the time. For the under 55s this rises to 62%.

Yet many are suffering in silence with more than half saying money is a taboo subject within their families.

Why is it such a difficult topic?

For many, money and wealth are touchy subjects. Our research discovered three main facets to the taboo against talking about money among people with inherited wealth.

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• Inter-generational, in which parents and children don’t discuss money with each other. This was the case with 57% of our respondents.
• Discretion, in which one does not discuss wealth with friends or colleagues so as not to either embarrass them or feel ashamed yourself. This was the case with 32% of our respondents.
• Publicity, in which wealth is not publicly disclosed (to the dismay of charities). This resonated with 23% of our survey.

It’s good to talk. But it isn’t easy.

Our survey revealed that 69% of HNWIs were supporting their families financially, yet more than a third have yet to have a conversation about their legacy and a seventh of them (14%) were not planning to have that conversation at all.

Many of the older respondents in our survey said they felt younger people didn’t value or care for money in the same way: that it was seen as something transient and disposable. “Easy come, easy go” was how one of our interviewees expressed it.

The current guardians of the family wealth said they also wanted to pass on their values of prudence and hard work. But how can this happen without an open discussion about where the family wealth came from? What sacrifices were made to build it? What is the founder’s (or founders’) vision for how that wealth is maintained and how it benefits the family? How does the next generation carry the torch for the family?

This is why talking about wealth is critical: the only way to shake off the awkwardness is to have regular family discussions about money in which everyone in the household is included.

Our top tips

For those families who may be struggling with starting the conversation, we have asked our advisers to give us their favoured advice.

Assess the opportunity

The toughest point of a tricky money conversation is often knowing where or how to start it. Something significant happening in your family’s life can be a useful conversation starter says Tsitsi Mutiti, Investment Manager at Charles Stanley. If one of your children is going to university, a chat about budgeting can help them start thinking about the future and is a good way to move the conversation to the next generation.

Mention a friend

Katie Tasker, Investment Manager, says you can make the conversation feel less personal by using friends’ or relatives’ changing circumstances to bring up the topic. For example, if a cousin or school friend is getting divorced casually say: “Of, course, they’ll have to change their will now.” And use this as an excuse to broach the topic.

Slowly, slowly, wins the race

Louis Coke, a Senior Investment Manager, says a ‘big bang’ approach can leave people feeling overwhelmed and is only essential in times of crisis such as terminal illness. Instead, think of this as a series of conversations that build a story about the family’s wealth.

Seek support if you need it

If you’re worried about the discussion becoming confrontational, Simon Davies, Director of Financial Planning, suggests asking the family to join you at your next meeting with a financial adviser “to help you make some important decisions”. It’s an opportunity for you to disclose the current situation and for the family to discuss future plans in a natural way.

Don’t wait to talk about inheritance

Conversations about inheritance tax can feel awkward, but there’s no point putting it off, says John Moseley, Financial Planner. ‘Good financial planning can minimise the impact of inheritance tax, although many of the tools can be complex. Importantly, the longer you leave it, the fewer options you have. It’s important that families talk about inheritance so they can plan their future finances. Not only will everyone be clear on what to expect, which can prevent family conflict further down the line, but it means as much of your hard-earned money as possible is passed on to loved ones.��

Stress the difference between ‘long term capital’ and ‘spending money’

Louis Coke believes the reason many high-net-worth families are good at compartmentalising their financial life is setting very firm boundaries around what is long-term or ‘family’ money and what is ‘their’ money. ‘Their’ money is earnings from careers or businesses that funds the family on a day-to-day basis. ‘Family’ money is there to support across the generations: to help with the purchase or renovation of ‘good assets’ such as property. Or to pay for school and university fees to make sure each generation get the best start.

Think about later life

As people get older, conversations about their finances become even more important. Rachel Fowler, Chartered Financial Planner, suggests tying discussions to things you want to do in later life can make it less awkward. Would you want to stay in your home or downsize, for example. This issue can be neutral ground and a step to talking about money.’

Conclusion

We develop our attitudes and beliefs about money in childhood. By talking often about money, and imbuing your children with good money management habits, you’ll set your children up for a future of financial success.

If you’d like to find out more about the money taboo and how it is impacting HNWI families, visit www.charles-stanley.co.uk to download the guide. You can also sign up to a webinar we are hosting on 3rd May 2023 at 12:00 hosted by broadcast journalist Joanna Gosling. Visit www.charles-stanley.co.uk to register.

The value of investments, and the income derived from them, can fall as well as rise. Investors may get back less than invested. Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority.