If you’re familiar with the hit TV series Modern Family—and even if you’re not—it’s probably old news that families look very different today than 15 or 20 years ago. Among many other factors, improved life expectancy, a high divorce rate, increasing numbers of LGBTQ households, and adoption at home and abroad have all expanded the range of family configurations. But sometimes, a change in family makeup pushes you into unfamiliar territory, prompting questions like:
- I’ve never been a decision-maker when it comes to finances. Where do I start?
- What’s the best way to articulate what matters most to me—and convey it to my children?
- How do I ensure my investments align with my values?
- How do I talk about wealth with my kids? When is the best time to start?
Tackling these concerns directly—and sooner rather than later—can help you come to grips with your new reality. Bernstein Financial Advisors work with all types of families to surface financial priorities and core values, helping alleviate anxiety during periods of challenge and change.
Case Study: Determining New Ground Rules after Divorce
Despite their best efforts to reconcile, John and Harry recently divorced. As successful professionals, they’d amassed a considerable pool of assets—which even when split—allowed each to maintain his lifestyle. John handled most financial decisions during the marriage since he’d worked in finance for over two decades. Harry was an accomplished surgeon who appreciated the importance of money but had only a passing understanding of personal finance and investing. Their two young adult children, Andy and Julianna, added another layer of complexity to their situation.
Harry’s Life as a New Decision-Maker
Harry’s advisor helped guide him through the intricacies of becoming an independent financial decision-maker. This involved exploring Harry’s own goals, risk tolerance, and income needs—which differed from those reflected in his marital assets. Through an introspective exercise led by his advisor, Harry ranked priorities like lifestyle, education, and philanthropy along with impact, legacy, and risk to help inform his choices.
For instance, since Harry selected impact, philanthropy, and education as top priorities, his advisor incorporated several purpose-driven investments in his portfolio while setting up a Donor-Advised Fund to facilitate gifts to charitable organizations. With some probing, Harry revealed that by education, he meant involving Andy and Julianna. He wanted his children to better understand the restructuring of their family wealth, and the role it could play in supporting their lives.
Are the Kids Alright?
When it comes to discussing money with children, there is no one-size-fits-all. Any number of things—from maturity levels, knowledge base, health concerns, and personal preferences—can influence your approach. Plus, cultivating stewards of family wealth goes beyond just knowing the numbers. Consider the following:
Family Values—What are my guiding principles?
Core family values are an important driver of how wealth is used. With his newly established household, Harry approached John about making a list of the values that remained dear to both. Revisiting the earlier guided exercise, this time they both participated, uncovering common ground that could make room for a united front. This isn’t always the case. Often co-parents must decide what is important, and both sides end up compromising.
Family Wealth—What do they know?
Andy and Julianna knew their fathers were successful but didn’t appreciate the magnitude of their wealth. Crystallizing family values creates an opportunity to reveal asset levels and convey expectations for the resources at your family’s disposal.
Education—Are my kids prepared to participate in financial discussions?
Stewarding wealth involves comprehending key aspects and making well-informed decisions. Harry enlisted his financial advisor’s help to develop a customized education plan for Andy and Julianna focused on financial literacy, investing, and asset allocation. Other concepts will also come into play, but Harry wanted his children to grasp the foundational ideas first. That way they could more fully participate in the decision-making process.
Determining when and how to broach wealth discussions with children is not easy. The approach typically depends on the family’s structure, unique circumstances, and individual children involved. Even within a family, each child is unlike the next—and those differences often shape conversations.
Whether your family identifies more with The Brady Bunch or Modern Family, a change in dynamics can cause significant stress. With proactive planning and the right professionals by your side, you can confidently embrace your new decision-making role.
- Emily Neubert
- Director—Wealth Strategies Group
- Matthew Marra
- Project Associate—Wealth Strategies Group