Talking Money With The Family

Most of us today realise the importance of creating wealth and passing it on effectively. But if there is one area where most of us are still severely lacking, it is that of talking to our families about our wealth openly. And this is even more true in the Indian context, where money management is almost always handled by a single member in the household. In most cases, our lawyers, chartered accountants and financial planners would know more about our wealth than our families do. One could even say that they probably should. But what we forget is that our families are the very reason why we create wealth in the first place. Therefore, they have as much of a right to know about our wealth as anyone else does. And that is why in today's blog post I'm going to talk about the importance of openly discussing wealth with our families.

Imbibing And Psssing On The Right Habits

Before talking about our wealth, we must first pass on financial habits and values that are conducive to wealth creation. These include frugality, discipline, humility and being unemotional about our investments. Most individuals who create any wealth of note invariably do it on the back of these qualities. Therefore, we must pass on all these qualities to those around us. It would be much more effective if we do it by example. If we don't possess these qualities ourselves, we must first work on imbibing these qualities before passing them on. Imbibing and passing on the right financial habits is not something that will happen overnight. It would be a slow process that would take time. But it is well worth going through. Passing on these qualities to our families would give them an impregnable foundation on which to recieve and digest our wealth. It would also enable them to manage our wealth applying the same principles we did to create the wealth.

The Right Things To Say

The first thing that we need to understand is that our wealth will continue to live on even after our time. So conversations about wealth with our families must also teach them how to use our wealth in our absence. It is therefore important to set the right context to all conversations about wealth. Most such conversations only involve us telling our families about the avenues in which our wealth is parked, and how much is parked in each avenue. But doing so much will only direct our families to our wealth. It would not tell them what to do with it. This means our wealth is more likely to decline than grow after our time. To avoid this, we must clearly explain to our families the circumstances under which we received and grew our wealth. They must also know what we intend to do with it in the future. Doing this makes it easy for our families to relate to the wealth they would receive and give them a clear idea of what needs to be done going forward. And our wealth would hence have a much better chance to grow even further after our time.

The Right Way To Say The Right Things

We usually wait until we are old or on our deathbed to talk wealth with our families. Waiting for this long leaves us with little time in which to put our thoughts across. Also, we may not be able to communicate effectively at that point of time owing to age or ill health. Most importantly, getting our families in sync with the way we have created and want to manage our wealth is not something that can be done in a day. It is a process that must be executed in a well calibrated manner over a few years at the very least. Therefore, discussing wealth with our families is something that we must do on a continuous basis throughout our lives. The best way to do talk wealth with our families is to do it personally. Some of us who may be too shy to openly talk about it may communicate our wealth through an exhaustive written document detailing our wealth. This would give our families a permanent reference point. But such an approach may be too impersonal. It would take away from the effectiveness of what we wish to communicate. It would therefore be prudent to personally explain the content of the document to our families. This ensures that communication of wealth happens through both personal and impersonal means. The option of enlisting professional help to give our families clarity about our wealth can also be be considered.

Calibrated Communication

The things we communicate about our wealth should remain the same across all members of our families. But the way we approach the conversation should differ based on the person who is on the other side of it. In the case of our partners or spouses, both parties must come to an understanding on the way wealth would be managed. A shared philosophy between both parties with regard to managing money would be highly beneficial. Each of us must involve the other in all major financial decisions and ensure that they play an active part in the decision making process. This would make it easier for our spouses to take over the exercise of managing our wealth in our absence.

The approach should be slightly different when it comes to having this conversation with our children. Our children are the ones who ultimately inherit all our wealth. Therefore they must never be frozen out of matters related to managing wealth and money. But instead of involving them in the decision making process straight away, initial conversations with them must be limited to educating them with the right financial principles. This will help them develop the right financial habits over time. Asking them to apply what they learn from us in their own day to day spending decisions will help them learn what we teach them practically. And this will set the right foundation for them to take over from us in the long term. In fact, if we have created our wealth following the right financial habits, we may rarely show our children how much wealth we have created. This should not be done in a boastful manner. Rather, it should be used as an opportunity to show them what following the right financial habits can achieve. This effectively shows that involving our entire family in conversations about wealth and the decision making process before making major financial decisions would also improve our relationships with our families.

Parting Thoughts

In conclusion, talking wealth with our families is something that we need to do in the right way at the right time. Delaying this exercise would lead to unnecessary complications both for us and our families. Passing on the right financial habits to our families would help them receive and digest our wealth effectively. Setting the right context for our wealth and coupling it with a clear action plan would clearly tell our families what to do with our wealth going forward. We must get our families in sync with the way we want our wealth to be managed gradually. We must try to arrive at a common philosophy on managing money with our partners or spouses. They must be involved in every major financial decision. We must give our children the right financial education to enable them to take over from us when the time is right. Doing all of this would not only protect our wealth, but also allow it to grow further, both during and after our time.