I remember it like it was yesterday. I was in the 6th grade, and my teacher found a dollar bill on the ground. She asked the class if it belonged to any of us, and I jokingly raised my hand and said it was mine.
It seemed innocent enough to me, but in two seconds flat, the girl sitting in front of me whipped around so fast her ponytail hit her in the face. She spit venom saying, “You don’t need that dollar, Catherine. Your parents are rich.”
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I was taken aback – floored actually. What in the world was she talking about?
I went home and asked my mom how much money she made, and she said, “That’s a very personal question, and it’s not something you’re supposed to ask people.”
Fair enough, I thought, but that left me confused as ever. You see, my entire life, my dad drilled it into my head that my parents weren’t wealthy. He was especially keen to point out examples of wealthy families on TV. “That is wealth” he would tell me after watching a documentary about the Rockefellers. “Don’t ever think you have money. People exist that have money you can’t even dream about.”
So, we weren’t wealthy. The Rockefellers were. Well, then why did the girl with the ponytail seem to resent me so much?
Keeping Things Hush Hush
It’s taken me a long time to realize why my parents never discussed their income. Now that I’m a parent, I know they just wanted to protect us from people like my classmate who seemed jealous of something I didn’t even know existed at the time. My dad especially was very insistent that we never tell people where we went on vacation and never revealed personal details to our friends at school.
Just to give an example, I always remember an incident around the time my parents added on to our house. My dad didn’t want people to know they were paying for an addition, and he reminded me several times not to bring it up in conversation with my friends. However, in preparation for the addition, several trees needed to be cut down and so they were marked with a big “X”.
I had friends over one weekend and they wanted to know why we had Xs on our trees. It was a simple enough question, but my dad’s rules made me nervous. Ever the honest child, I told them the X’s on the trees were a family secret, and I wasn’t allowed to tell them. Looking back, I’m sure my friends thought we were in some bizarre tree-worshiping cult, but I understand now why we had these “family secrets.”
Simply put, people treat you differently when they think you have money. This can work both in our favor and against us, and it’s really in the moments it works against us that causes the most uncomfortable situations or “character building” as I like to call it.
So, is it our responsibility to tell our children about their family wealth, and if so, what are the pros and cons? Is there a right age to tell your children they’re rich, and if so, how will the discussion of wealth affect their potential in the future and our relationships with them?
Studies like the Economic Mobility Project show that a child’s future income will likely resemble that of their parents [see chart below]. Thus, this question of whether or not to discuss wealth will likely be something your own children will grapple with once they have children, provided they either inherit your wealth or go on to professional careers that will merit a similar lifestyle. Because of that it’s time for us to make these decisions now, since it will affect them long into the future.
Answering The Question: Are We Rich?
In his now infamous documentary entitled Born Rich, Jamie Johnson of the Johnson & Johnson fortune revealed that he didn’t know about his family’s wealth until he was 10 years old. It wasn’t even his parents who told him about it. Instead, during a free period in the library, one of his classmates was reading a “Richest People in America” article in Forbes magazine. The classmate found a picture of Jamie’s father in the article, and apparently the whole class – including Jamie – found out about his wealth together.
This is not unusual among high net worth individuals. In fact, a Wall Street Journal article about parents who make more than 20 million dollars a year indicated that “only a third of wealthy parents have discussed their wealth and its implications with their children before the age of 21.”
Parents who choose to shelter their children from their wealth, whether it’s in the 20 million dollar range or not, should reveal it sooner rather than later. I assume many of these families are waiting for the appropriate time when children can comprehend its ramifications, but in an increasingly social and connected world, one Google search by a child can reveal so much more than we can imagine. Plus, the earlier children understand how to manage money the better off they will be as adults.
Ultimately, I liked my parents’ approach of helping me understand that we were fortunate, but not wealthy. After all, having a six figure salary no longer means you’re rich, and I think it’s important for children to realize there are many different levels of wealth. This helps to prevent entitlement down the line. Also, if children believe and understand that there are others more fortunate than they are, they are less likely to brag and reveal private family details. At least, it worked on me.
Wealth Does Not Prevent Problems in Children
As many of you reading this likely know, having more money does not necessarily translate to having an easier life. In fact, a study published in Current Directions in Psychological Science showed that “upper-class children can manifest elevated disturbance in several areas – such as substance abuse, anxiety, and depression.” What was most revealing about the study was “that youth at the socio economic extremes were more similar than different.” – the poor and the wealthy displayed emotional distress.
In other words, even if you don’t tell your children they’re rich, there are still “achievement pressures” that are common in upper class families. These pressures can lead to substance abuse and other psychological issues.
This idea is not new. A 1984 article in the New York Times quoted Chicago psychiatrist Roy Grinker saying, “the similarities are far greater than the differences” between poor and rich children in terms of emotional suffering.
The study reinforced Dr. Grinker’s opinion; many of these issues are linked to emotional attachment problems with parents (it seems it’s common for high net worth individuals focus more on their work than their family). Essentially, even if you spend an exorbitant amount of money on medical care to treat these disturbance issues, there is no substitute for parental involvement and emotional interest in the child.
So, what really matters in all of this is not what you tell your children about their wealth but how you interact with them and influence them in their day-to-day lives. Whether you make $100,000 a year or $10,000,000 a year, closeness and interest from you, the parents, will primarily determine how your children will handle their unique position in your family. It will also determine how much they will appreciate and benefit from the valuable resources that are available to them.
Telling your children about their wealth may breed trust. Telling them how to handle their wealth in the face of public scrutiny will teach them important social skills. Emphasizing that they are fortunate but should not be entitled will create another generation of those who understand and appreciate wealth instead of abuse it.
Thoughts for Moving Forward
Suniya S. Luthar, Ph.D., author of the previously discussed study, wrote an updated article last year entitled The Problem With Rich Kids that emphasized “the privileged young are much more vulnerable today than in previous generations.” This means it’s time to pay more attention to how our children will fit into a changing world, one where the income gap between the 1% and the rest of the country is widening, which will lead to more resentment from those not in the same socio economic standing.
Ultimately, the choice to tell your children about their wealth is yours, but in a country where financial education is seriously lacking, it should be up to parents to teach their children about money, especially their own. This will create a more open dialogue, more trust between parents and children, and hopefully result in less emotional issues in the future.