Should You Wait To Tell Your Children They’re Rich?

in Financial Planning by

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.”

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.

tell your children they're rich

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.

the 1%

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.

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Catherine Alford

Catherine Alford is an award winning personal finance writer who contributes to several online publications including The Huffington Post, top personal finance blogs, and her own site, BudgetBlonde.com. She received a B.A. from The College of William and Mary and an M.A. from Virginia Tech. When she is not reading and writing, she is taking care of her young twins. Follow her on twitter @BudgetBlonde.

30 comments

  1. Stefanie @ The Broke and Beautiful Life

    My parents were big income earners. I knew we were okay cause we lived in a nice town and in a nice house and took nice vacations, but we never had cars, ipods, or any of the “trappings”, so I don’t think I realized how well off they were. Of course, they both got laid off the year I started college, so that changed life quite a bit.

    Reply
    • Catherine Alford

      Hey Stef – Thanks for commenting! That’s interesting, and I have a similar story. Right when I started college Hurricane Katrina hit and really decimated my parents’ business (and home). That was a big wake up call, although everything is fine now.

      Reply
  2. Kassandra

    My mom was never a high income earner and she experienced a long lay-off so I was acutely aware of our financial situation in comparison to those of my friends. It was tough but I am glad I knew the truth to some extent. With my stepson, I don’t want him to be judged or taunted because he may have access to things that other classmates don’t but it’s hard to shield him 100%.

    Reply
    • Catherine Alford

      It’s definitely complicated when it works the other way around. I’m sure your moms struggles influenced you to be the hard worker you are today though!

      Reply
  3. Kirsten

    Interesting. We are well into the six figures, combined, and need close to 25% of our take home pay just to pay student loan debt. I’m not sure that my girls will ever feel like they are rich. Although, I do get some looks from people who know where we work when I say that we live pay check to paycheck. They know we must earn quite a lot, but they have no idea about the debt… A little different, so now I’m chewing on how to handle the disconnect for my girls. They are likely to be told we have plenty of money and I’ll have to explain the whole debt thing at an early age.

    Reply
    • Catherine Alford

      Yeah unfortunately it’ll be hard to shield them when they hear where mom and dad work but I’m sure you’ll have classy girls who will take it in stride!

      Reply
  4. Lance @ Healthy Wealthy Income

    On the other side I didn’t know my parents were poor. My dad was a school teacher and that was our only source of income. I remember going to look at cars and if they were over $500 I knew we couldn’t buy it, but I thought that is what everyone else did as well. I just assumed everyone had cars that constantly broke down. I didn’t feel poor, I was a happy kid and it probably helped me to appreciate what I have today. My parents really had to work hard and it made me want to work hard. Problem now is my daughter gets super spoiled now that my parents do have money. I want my daughter to appreciate and work for what she has in life and not just assume everything will be handed to her. If we can do that I expect her to do even better than her mom and dad, just like I did.

    Reply
    • Catherine Alford

      That shows how great your parents were. Many children who grow up poor are acutely aware of it so the fact that you weren’t shows they did things just right!

      Reply
  5. Genevieve @PFTwins

    I probably would be very honest with my kids.

    It’s because I’m a very upfront and honest person and I’d want to speak frankly with my future kids as well. It’s hard for me to be anything else. I probably would not share specific numbers until they are old enough to keep it to themselves.

    Reply
    • Catherine Alford

      Yes as long as they can keep it to themselves and are polite about the information, I think the more sharing the better!

      Reply
  6. Broke Millennial

    I never considered my parents’ wealth “mine” so “I” wasn’t rich, they were. I still have that mentality today. I have a general idea of how much my parents now have, but to this day don’t know the exact number. I think so much of this question depends on the environment you’re raised in. If you grow up in a generally wealthy community, then it tends to be a reverse issue: who doesn’t have as much? Bit of a lose-lose there.

    Reply
    • Catherine Alford

      I also have that mentality. I’ve worked hard to be completely financially independent from them because I want them to enjoy their wealth and I expect the same of my kids.

      Reply
  7. Syed

    Very thought provoking post. I had an interesting experience with this as a kid as my parents made really good money when I was very small but had a period of job loss for quite a few years after that. The thing is, us kids couldn’t really tell. My dad did eventually explain the situation to me when I got older, but there was really no indication of how much they made or that there were financial difficulties. I would’ve liked to known when my parents were going through trouble so I could help out in any way I could, so I don’t plan to keep financial info a secret for too long from my kids.

    Reply
    • Catherine Alford

      Interesting perspective. It’s hard when we have to watch our parents go through those roller coasters of job loss or business issues. Sounds like you have a good plan for your kiddo!

      Reply
  8. No Nonsense Landlord

    Rich is very relative. You can be a multi-millionaire, and still think you are middle class.

    Reply
  9. Matt

    I distinctly remember having financial conversations with my Father at a young age. In my teens we reviewed his quarterly statements and stock picks. When I was 15 my allowance was cut off and he got me a summer job at his country club as a greens keeper; I had to save all summer so I would have money during the school year.

    At 18 I didn’t qualify for financial aid because of my parents income. When I went to college I had to sell my car (which he bought) to pay tuition the first year. My father said if I did well, he would pay the rest of my way through.

    I once asked my Father why he didn’t own a flashy car and a big house since he had the money, and I remember him telling me “How much money we have is nobody else’s business.” I think because he never flaunted his own wealth, and made sure I had to work for mine, that I developed a similar mindset.

    Reply
    • Catherine Alford

      I love that mindset and think it’s very healthy and wise!

      Reply
  10. Bob

    I’m well off … maybe I’m “rich” … but I still feel middle class. My image of “the rich” was formed by TV in the 60s, where I learned that the rich live in “manors”, have stiff butlers with British accents, and maybe even have a secret cave under the house with a lot of cool equipment in it.

    Reply
    • Catherine Alford

      It’s funny how we all have different opinions of what wealthy means. A butler would be nice, now that you mention it!

      Reply
  11. jp

    I think the title is misleading… the children AREN”T rich, the parents are. That is a significant difference! If a parent chooses to leave a trust fund or inheritance, great. But some parents may choose to help get their adult children established in a home, career, business or other, generous gift of support. Some parents may not. My family consists of 2 self made millionaire adults and 2 children. We will help the kids get started, but not enable them to ignore or discount the habits and work ethic that got US to where we are. My mantra is: “You can either look rich or be rich, but it takes too much money to do both.” We are, truly, the low key millionaires next door.

    Reply
    • Joseph L. Sexton

      Thank you, I worked long days & weeks, invested my money, even tried to opt out of SS as I knew it was a Ponzi Scheme, especially after it was put on budget by the people’s party leader at the time Lydon B. Johnson in 1968 to fund his taxpayer funded hand outs to the poor(?).

      I’m seriously thinking of a Spendthrift Trust, so as to limit their spending. Money & things not earned, are too often not respected.

      Reply
      • Catherine Alford

        Once they earn it themselves, they will respect it more!

        Reply
    • Catherine Alford

      I love that mantra! And I also love your desire to pass on work ethic to your children rather than money. I hope to do the same.

      Reply
  12. Cleveland Native

    Hi Catherine,

    Great piece. And great advice re dealing with my kids and the subject of wealth.

    One minor edit: The Wall Street Journal article you cite involved interviews with families with a net worth of $20+ million, not families that made $20 + million a year. But in my book, either group would qualify as rich.

    Reply
    • Catherine Alford

      Ah you are so right. Good catch. My apologies for that detail!

      Reply
  13. Noah

    I’m 24,my mom and dad both made millions off the stock market. They told me and my sister what they roughly made together. It was around 7.6 million dollars.To this day I haven’t told any of my close friends because I don’t wanna get judge as the rich kid. So my suggestion is you keep it low key

    Reply
  14. Lydia

    Chris Rock said he doesn’t understand his kids because they are rich and he didn’t grow up rich. I think that’s the wrong mentality to have. He should be telling them that he’s rich and they aren’t or teach them how to handle wealth if he decides to give them his money.

    Reply
  15. Tommy

    I am rich in love and friendship… Isn’t that all that matters?

    Reply

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