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ChildrenThe decision of whether to tell your children about your income and assets is a tricky one.  Many parents believe it is not any of their children’s business.  Other parents are free about talking with their children about their assets.  At least in regards to estate planning, it may be a good idea to talk with your children as you can prepare them for their inheritance, no matter how small it may be.

Why is this important?  Experts believe that baby boomers will receive up to $12 trillion as an inheritance from their parents and then pass on $30 trillion to their own children.  This is substantial wealth!

The reasons why parents do not tell their children about their wealth or what the children will inherit vary widely.  Wealthy parents may not want their children to become lazy or rely solely on their inheritances.  They want them to be productive members of society and self-sufficient individuals who work to reach their potential.

Parents who do not have a lot of assets may also feel hesitant.  They are unsure if their retirement funds will last until the end of their lives, let alone get passed on to their children.  They do not want to talk about giving an inheritance and then not have an inheritance to pass one.

Why You Should Tell Your Children About Their Inheritance

These are valid concerns.  However, not talking with your children may cause its own set of problems.  They may not be financially, emotionally, or socially prepared to receive a large inheritance.  They may become wasteful or begin to question if those around them are using them for their money.  The concern about wastefulness is not limited to just children with a large inheritance; even children who receive a small inheritance can still view it as free spending money and waste their inheritance.

What You Could Tell Your Children

You do not need to show your children specifics about your wealth.  Instead, you can talk with them generally to help them have an idea of what to expect.  More importantly, you can use the opportunity to refresh in your children’s minds your values, morals, and vision for their inheritance.  Help them understand the opportunities that their inheritance can offer them: college education, charity work, entrepreneurship, and other worthy efforts.  You can help your children begin to acquire the same vision for their inheritance that you have.  If you have a trust-based plan, you can explain the distribution provisions to your children to help them understand what is acceptable.  These conversations can help you children learn the importance of wise financial decisions, setting and keeping goals, investing, and saving.

There is one more way in which you can help your children develop the financial responsibility that the need, and that is being financially responsible yourself.  Studies have shown that parents that are good examples to their children have more of an effect on their children’s behavior than parents to teach good principles but are not good examples.  Your financial example is incredibly important and you can do many things to instill your financial values into your children, even from an early age.  Many times, what is important to you will be mirrored in the lives of your children.  Of course, the most effective way to teach children about money is to be an example; let them see you using your money in ways that reinforce your values. Many parents show how they value family relationships by spending their money on family vacations or buying a second home where the entire family can gather for summers and holidays. If your children see you being charitable and helping others, chances are they will become charitable, too.