Wealth Planning

How to give your children skills to manage wealth

Here’s how one couple told their daughters about family wealth—and gave them the skills and support they’d need to manage money.


Fall sends children back to school and parents into wealth planning mode for year-end taxes. As you think about your family’s finances, you also may want to consider teaching your children how to think about and manage money.

For instance: Will you tell your children about the family’s wealth or will they find information and make assumptions based on their observations and, perhaps, peer’s comments? Children as young as five are curious about money and capable of learning a great deal.

We believe it is far better for you to create an open dialogue as early in your children’s lives as possible, share facts relevant to your children’s ages, and make conscious decisions about how you want them to interact with the family’s wealth. You may even want to prepare your children for conversations about money with their peers. 

Being open with older children about how much they may inherit, and when, can provide you with a valuable opportunity to discuss your expectations about how they will use their funds. 

Also, if you are considering creating, funding or adding to trusts for your children this year, it’s best to start discussing your options as early this fall as possible. New trusts take time to create properly—and any trust you create should be thoughtfully integrated into your overall wealth planning.

How might you go about teaching your children how to manage money? Here is just one example of one approach.    

One family’s story

Our two daughters were set to inherit a meaningful amount when they came of age, but until the younger was 14 and the elder 16, they didn’t know enough about how to manage wealth. Of course, we’d long been giving them allowances and doing our best to model responsible financial behavior. But, frankly, they would need to learn more considering that, one day, they would be responsible for their own finances and investments in a complicated world. 

We worried that if we tried to talk with them about it, our advice might go in one ear and out the other. I could just imagine my younger daughter sneaking looks at her phone as we were speaking and me blowing my top. So, for the same reason my wife and I didn’t tutor them in history or show them the finer points of tennis, we turned to professionals.

To begin, we set up a sort of “starter trust” for both girls and funded it with a relatively small sum. We also opened custodial brokerage accounts for each of them. Then, we had the girls meet with the trust officer who’d be managing their trust. We wanted to make sure they knew her name, had her telephone number, and understood how accessible and helpful she could be. Together, they went to meet her and their J.P. Morgan representative at the firm’s client center in the city. The trust officer took time to explain to our girls how trusts worked and how they could use their starter trusts and the brokerage accounts to learn about investing. The group also discussed how much the girls might spend and still have the principal grow.

The girls had good questions. For example, when my oldest daughter heard that she and her sister were to be beneficiaries of the same trust, she asked if the trust should be cut in two to avoid their fighting in the future over spending. The trustee agreed this was a good idea, as did we; so those arrangements were made.

In what was also a nice touch, the J.P. Morgan team included a junior investment advisor, closer to the girls in age, who not only made house calls to follow up, but also was available by phone to keep tutoring them in investments, their portfolios, interesting stocks, and where their choices were going right and wrong. Our girls are quick learners, and we are ever more confident that, with professional guidance, they will grow responsibly into their inheritances.

Explore your options

These parents took a very structured stance so they could remove the angst from their family’s money conversations. They also were able to engage professionals to help teach their children about investing.

But this is only one approach—and it happens to include trusts and older children. Your family, your finances and your goals may require another. Speak with your J.P. Morgan representative about how you might empower your children in money matters. 

This case study appears in our “Teaching children about wealth” workbook. Ask your J.P. Morgan representative for a copy of this guide for parents and grandparents.
 
All case studies are based on real-life stories but have been altered to preserve privacy and confidentiality. Any name referenced is fictional, and may not be representative of other individual’s experiences. Information is not a guarantee of future results.

 

 

 

 

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