Are Your Parents Secretly Rich?
The family’s financial situation is not an everyday topic of conversation between parents and their children. Some of the wealthier folks note the common fears of poor money management of the younger generations and prefer hiding their riches from their kids.
As financial illiteracy of American children becomes a rising concern following the recession, millionaires may think twice before having their wealth create adverse effects on the financial and career development of their children.
It is not unreasonable for millionaire parents to heed the lessons of tales of how children squander their large family inheritances - and to keep their wealth a secret until their children have matured.
U.S. Trust, a private wealth management subsidiary of Bank of America, conducted the study on 457 high net worth individuals with $3 million or more in investable assets - to take a close look at how these individuals regarded generational transfer of wealth.
According to a U.S. Trust Insights on Wealth and Worth survey, over half of affluent parents have not disclosed their wealth to their children while 15% of surveyed parents have not offered any details about the family’s wealth.
Nearly one-third of wealthy parents never thought of sitting down to talk family finances with their children.
And, 24% were afraid that the family wealth would make the children lazy while 20% were concerned that children would make poor decisions with the money and another 20% feared the family wealth would be squandered away. Similar to how lottery winners fail to manage a substantial windfall, a large inheritance is not necessarily a blessing.
A small 13% of parents were worried others would take advantage of children of wealth.
Although many of the surveyed parents acknowledge the possible negative effects of their children learning of the family riches, 49% still felt that “it is important to leave a financial inheritance to the next generation even though they consider the success of their children to be one of the most important measures of their own success.”
An earlier study by Merrill Lynch found that roughly 74% of wealthy parents passing on financial knowledge from professional advisors to their children as their focus turns to financial literacy. With sound money management skills, parents hope their kids will be able to handle their inheritance in addition to achieving career success.
Would you (or do you) share the knowledge of the family riches with your children? Do you believe these wealthy parents should keep their millionaire status a secret?