The money messages and lessons we hear as children and young adults, as well as the behavior we witness within our own families and communities, influence our life-long decisions about spending, saving, investing, and giving. As parents, grandparents, aunts, uncles, mentors, and teachers of the next generation, both our words and our actions have an impact on creating thoughtful and responsible adults who understand how to make good decisions about their wealth.

At Brown Brothers Harriman (BBH), as advisors to many families, we have a unique perspective as our clients seek to develop a plan (or not) for navigating complex issues related to wealth as they raise their children. We have learned so much, and we hope you will find these strategies helpful. We know we have!

1. Early and Often

“Little kids have little problems. Big kids have big problems.”

Every new parent hears this advice from tired veteran parents. This advice is also applicable to conversations about money.

Little kids have little questions: “Mooooooom, why won’t you buy me this fabulous plastic toy (that I just fell in love with two minutes ago)?”

These questions are relatively easy to answer, and in answering, parents and other caregivers have three primary goals – to teach delayed gratification, responsibility, and autonomy. Together, these skills form the basis for prudent financial decision-making.

Delayed gratification, the ability to resist temptation, comes in small doses for young children, which can make it difficult for them to make responsible choices and think independently. These small lessons can be woven into everyday conversations from a young age – start early!

In middle and high school, kids often begin to understand the disparity in wealth and might ask questions like, “Is this vacation expensive?” or “Are we rich?” As they mature, parents can share more when talking to children about money. For example, it might be helpful to explain that a vacation is expensive, but for our family to be together and have experiences outdoors or in other cultures is important to us, so we prioritize taking nice trips together during school breaks. Not talking about the expensive vacation (or car, home, etc.) doesn’t make it invisible and probably results in misguided assumptions.

For older children, there is always time to initiate conversations about spending and saving decisions. Older kids are often confronted with decisions that act as a training ground for future financial success. Don’t pass up opportunities for more significant discussions, like what to do with a first paycheck or how to use a credit card responsibly.

Children are often curious about their parents’ decisions – and mistakes! When they ask questions about your behavior, seize the chance to talk about why you spend, save, and give in the way you do, even perhaps reflecting on some decisions you wish you had made differently.

2. Know Your Own Limits

While starting conversations about money at an early age and continuing to have age-appropriate discussions are critical, you are not required to answer all the questions your children ask. I repeat: You do not need to answer all the questions! Understanding your limits in these conversations can provide a sense of comfort as you wade into more mature and complex subject matter. Consider what you want to share now, later, and perhaps, much later.

As kids become cognizant of wealth and what it means, a favorite question is, “How much money do we have?” (In my experience, fifth graders love this question and will ask relentlessly.) Other variations on this question include:

• How much money do you make?
• How much money are you going to give me?
• How much money do my grandparents have?

These are not questions that most parents will want to answer until much later. Children, and most teenagers and college students, do not have enough life experience to put the answers to these questions in context. Working a summer job for 10 weeks does not prepare a teenager to understand the family balance sheet. There is often much more preparation to do before it is appropriate to share information this weighty.

In response to questions like these, especially for younger kids, it is appropriate to ask them why they are curious about it. Sometimes, it’s not what you think: Perhaps a friend’s parent just lost a job or must downsize their house. Additionally, it is always okay to respond with, “I am not ready to share that information with you right now.”

For teenagers and young adults, the response might be a bit longer. You can include why you are not ready to share, as it should be clear that the lack of response does not imply a lack of trust or affection. While you might trust your accomplished 20-something student to understand the big picture, putting large dollar amounts into perspective requires understanding the family’s wealth values, a robust financial education, and maturity – and these things take time. It also often takes parents considerable time to become comfortable divulging this information. So, it is appropriate to tell older children that you intend to share more details with them in the future, but you are working through a process – to ensure that it is the right time for them and you.

3. Don’t Fear the Hard Questions

The hard questions about money can be daunting! However, they also provide clues. These questions might be a window into a child’s thought process.

While talking about money is taboo for adults in most situations, it is not for kids. They are likely to have conversations around the lunchroom table, and they might not be able to digest or fully understand some of what they are hearing. Older kids, especially those going away to school for the first time, might have insight into what their peers have and how they live in a different way.

Again, a possible response is, “Interesting question. Why are you asking?” or “I am curious about why you think knowing this information is important.” Using a tough question as a jumping-off point for a conversation might lead to learning more about their thought process or a decision they are contemplating.

It is okay, and even helpful at times, to admit that you are uncomfortable and don’t have all the answers.

For example: “Dad and I are so lucky and have obviously been able to earn significant wealth. We didn’t grow up with wealth, and we don’t know yet what we want to do with it. We want it to help and not burden our family, and we are still working through the decisions about how much to give away, how much to spend, and how much to share.”

When a tough question comes up, the key is not to shut your child down – it’s normal and healthy for kids to be curious – but to be transparent about why you are or are not answering the questions.

For young adults, 20- or 30-somethings who might be planning their own families in the near future, these questions might indicate that they are grappling with their own financial future. Parental decisions about wealth have real impact in this phase of life, and parents should strive for transparency. Wealthy families cover the spectrum in how to benefit adult children – from giving them nothing beyond a quality education to allowing them to access substantial wealth. For most, the answer lies between these options: paying grandchildren’s tuition, helping with a down payment, or providing start-up capital for an entrepreneurial endeavor.

Whatever your decision – and it is deeply personal – try to be clear in your intention and not create false tests or hold the decision hostage until the right time. These types of financial support are gifts. A gift is given voluntarily and out of caring, not a bargaining chip. “I will pay tuition for Junior only if he attends my alma mater” is a form of financial coercion that does not create gratitude or family connection.

4. Transparency Beats Misdirection

The 17th time your child asks how much money you have, you will be tempted to give in and make up some fictional number to get him or her to stop badgering you. Instead, take a deep breath and resist the impulse to lie. Misinformation is almost always a bad idea – not only because it erodes trust, but our kids are excellent detectives in many cases.

The internet is packed full of personal financial information for inquiring minds to access. For example, compensation and bonus information is available for public officials and company executives. Zillow is a wonderful source for those interested in real estate. Kids can quickly learn what their parents – and all of their friends’ parents – paid for their homes. Refusing to share or discuss information they might already know through other means will cause them to seek answers elsewhere.

If a child asks a question they can find the answer to some other place, it is best to hear it from you, even though it might be a challenging conversation to navigate. Private business owners often run into this issue. For example, a family with children in high school sold the family business for a considerable sum. They shied away from sharing the news with their children for good reasons – they did not want them to feel entitled to the money or less motivated to excel. When the sale was announced publicly, the very knowledgeable friends of these teenagers enthusiastically shared the news. Instead of feeling excited about the family’s newfound wealth, these young people were overcome with worry: Their parents would be unemployed! They did not have enough information to fully appreciate the economic consequences of selling the family business.

For business owners, the sale of the company can impact the family’s identity in the community and its financial position, and sharing age-appropriate information about the decision and the sale process can help kids put the transaction in perspective. These decisions are certainly linked to family values and legacy, which parents can use to educate the next generation about what is most important to them.

Finally, without enough information, kids might assume that the sale proceeds will land directly in the family’s bank account, which is rarely true. Share information about any profits reinvested in the resulting business, to be invested in a new venture, or to be used to fund a charitable vehicle and why.

Too little information can sometimes be as damaging as too much information. When the information is public, your job is to control the narrative – don’t let the gossip mill get ahead of you.

5. Remember to Listen

Listening is almost too simple, too cliché, to include in this list. However, listening can be much more profound than merely pausing your lecture for a moment to see if your audience is still conscious. In listening deeply, parents can be their children’s most important thought partners as they grapple with increasingly complex questions around the appropriate purpose and use of money.

In Nancy Kline’s book, “Time to Think: Listening to Ignite the Human Mind,” she examines the power of active listening and above all, not interrupting. She has labeled this state of active listening “the thinking environment.” Instead of telling the people in our lives what to think, she recommends helping them think for themselves. This is exactly what we want our kids to do when it comes to being responsible and thoughtful with wealth – be able to think capably for themselves to make good decisions over a lifetime.

When a child faces a financial challenge or decision, parents are often quick to try to solve the problem or give advice. However, Kline cautions against immediately giving guidance or direction:

Give people a chance to find their own ideas first. That chance will take more time than you probably feel comfortable with. Wait it out longer than you want to. You can always resort to telling them what to do later. You, like the rest of us, are probably expert at that. To help people think for themselves, first listen. And listen. Then – listen. And just when they said they can’t think of anything else, you can ask them the questions, “What else do you think about this? What else comes to mind that you want to say?” … In the presence of the question, the mind thinks again.

A parent can lecture a child all day about not spending too much of his allowance in one place or about a poor decision he made, but if the child discovers a better way on his own, it’s his idea! The result transforms behavior.

Said another way, when a child comes to an understanding or decision herself, with the help of a listening partner, the lesson is much more likely to stick. The next time the opportunity presents itself, listen first – and perhaps for longer than you are initially inclined.

6. Provide Opportunities to Fail Small

To teach children to be successful, financially responsible decision-makers, giving them the independence to make decisions about money is critical. Sometimes this means they will make the wrong decision and then have to cope with the consequences. Failure is an integral part of the learning process. However, just like teaching a child to ride a bike does not begin by putting them on a challenging rocky trail for their first ride, teaching financial skills should not start with large dollar amounts or a significant trust. Start small and build from there.

The first time you give a young child a crisp $5 bill as her weekly allowance, she may lose it or misspend it. This small failure will likely result in tears, but there is no substitute for the experience. The following week, she will likely think twice about carrying the $5 in her hand or spending it at the first opportunity.

Giving a child the freedom to make age-appropriate choices is important; allow her to make mistakes and, most importantly, to learn from them when the stakes are relatively low.

Here is the flip side. Let’s use Samantha, a successful CEO, and her son as examples. Samantha’s son is a recent college graduate living in San Francisco and pursuing an investment banking career. Naturally, Samantha wants him to succeed, and she has the resources (both financial and network) to allow her son to live in an expensive city and ensure that he lands a plum first job. Samantha arranges several interviews for her son at well-known investment banks. In addition, her son receives the income from a sizable trust Samantha and her husband established.

For Samantha’s son, sadly, there is little opportunity for failure. Even if he shows up at his interviews unprepared, seems unmotivated, and does not land the first job, he will move to the next opportunity his mother has provided. He does not have to create a budget or worry about spending. There is no consequence to making bad decisions – no risk to sharpen his mind on the current opportunity. Without consequences, it isn’t easy to learn how to make better choices and why it is important.

Of course, parents rightfully want their children to feel safe and secure. If something disastrous happens, a month-long illness or loss of a job due to an economic downturn, many parents want their children to know there will be a parental safety net. This security allows children to take responsible risks. But there is a big difference between a safety net and a free ride. Kids must have age-appropriate opportunities for failure, hopefully without lifelong ramifications, to learn how to responsibly manage wealth.

Articulating the purpose – the why – behind a gift helps the next generation understand the planning and thinking of those who came before them. It also helps them perpetuate those values in their own lives, including in how they use their resources, inherited and otherwise.

9. Walk the Talk

While children learn values and behaviors by hearing the stories and lessons from their ancestors, they also learn from watching closely.

The Women’s Philanthropy Institute (WPI) at the Lilly School of Philanthropy at Indiana University studied how children learn the value of generosity. WPI found that adult children whose parents give to charity are more likely to be philanthropic themselves. Seeing the value in action matters. However, it matters more to girls. WPI found that modeling the value has a greater impact on girls than boys, who learn more from hearing the value articulated. Our girls are watching closely. Our boys are listening – both matter.

One way to gauge what children are seeing and hearing is to quickly list your top three values. Then, look back at your calendar and consider how you have spent your time over the last week. Are your actions aligned with what you care about most? The difference between your stated values and what is in your calendar might uncover the difference between operational values and aspirational values.

Aspirational values are those we might write in a family mission statement – what we work toward. Operational values, however, are revealed in our actions, including how we spend and manage money – they drive how we make decisions. An observer of our daily habits and behaviors can discern our operational values very clearly.

Children are their parents’ keenest observers. No matter how many times a parent says he values hard work, if his son grows up seeing him live off a trust fund without any explanation as to where the money comes from or how he earned the capital, the son may not appreciate the value of hard work. Actions do speak louder than words – our children learn by observing and will inherit our operational values.

10. It Is Never Too Late to Start

We often hear from parents who think that it is too late. They (or their adult children) are unredeemable because they did not start teaching these things early enough or didn’t model the right behavior at the right time. It’s not too late! Lousy behavior happens – everyone has made a bad choice with money. The question is: How do you stop a pattern and change course?

The first step is acknowledging, “We are on the wrong path.” The second step is communicating course correction: “As your parents, we don’t think we have set the right tone for how we should use money. Let’s rethink it, starting with what matters most to us as a family.” The conversation starts with values, which can serve as a north star for a family’s financial plan, including allowances for children, estate planning, and philanthropy.

Women & Wealth Magazine thanks Ellen Perry, BBH Senior Advisor, for her contribution to this article.