Pass Along Financial Values, Not Just Wealth, to Your Next Generation

MILWAUKEE, Oct. 28, 2014 – Many parents struggle with how to talk to their children about money. Yet, the topic takes on greater significance when parents start thinking about passing on their assets and preparing those same children to eventually become their heirs. Tim Steffen, CFP, CPA, Baird’s Director of Financial Planning, believes planning for this transition needs to start early – while children are still young – and that parents should take tangible steps to pass on the financial lessons and values they’ve learned through life experience.

"It can have a powerful impact when you open up to your children about what has worked for you and what hasn't," Steffen said. "What's key here is to establish a dialog early and to show as well as tell. Talk about what you think contributed to your success. Discuss and demonstrate your spending, saving and investing habits. Tell them who helped you along the way."

It's just as important that parents talk candidly about the mistakes they’ve made and the consequences. "For example, you might discuss missing a credit card payment and what it cost you in interest, late fees and a lower credit rating," Steffen said. "Tell them how long it took you to dig out of a hole and what you could have done if you hadn’t made the mistake."

Thinking through the process now can also help alleviate any anxiety parents may have about their children not being ready to manage the wealth they’ve worked hard to accumulate when the time comes.

Connect money to work

Steffen encourages parents to begin talking to school-age children about where the money they have comes from and how it helps support the family. This doesn’t mean parents need to discuss specific dollar amounts with their kids, he said, but covering these concepts generally can be incredibly valuable, even at an early age. If they can, parents should provide opportunities for their children to see them in action on the job, as well as talk about what they do and how they developed those skills.

High school students should be encouraged to work part-time, at least during the summers. “It’s important to help prepare your kids with real experiences and help them develop good money management skills,” Steffen said. "Help them set a savings goal, spending a portion of the earnings and setting aside the rest." Be sure to cover the basics such as why they pay taxes and where that money goes.

If parents own a business, Steffen recommends they take time to teach their children about the rudimentary aspects of how the business works. Give older teenagers an opportunity to contribute to the business’ success by doing some entry-level work and earning money in return for their efforts. "There’s value in starting at the bottom of the ladder," Steffen said.

Let them get hands on with money

Giving younger children an allowance can be a great way to teach them how to manage money and understand basic ideas such as saving. To help older children gain experience and build confidence in managing and investing money, parents might consider passing on a small sum to be used for buying a stock or investing in a mutual fund. Steffen recommends parents allow the child to take ownership, from choosing the investment vehicle to tracking the investment’s progress, with guidance and input as needed.

After college graduation, parents who have the financial means might be ready to give a larger sum of money to their child to be used to make a down payment on a first home or start a business. Steffen recommends this be done with no strings attached. “It is important to let go,” he said. "The goal is to give them the opportunity to put the money to their own positive use."

It might be hard for parents to make a no-strings-attached gift, but seeing how their children handle those gifts can give parents great insight into how they will react to a larger inheritance later in life. "If your son or daughter burns through a relatively small gift quickly, you may realize you need to put more controls around the larger inheritance that is coming," Steffen said. "On the other hand, if he or she handles the gift responsibly, it may give you a greater level of comfort in making future, larger gifts."

Mobilize your resources

If parents have a trusted relationship with a financial advisor, they might want to introduce him/her to their children sooner rather than later and enlist his/her help in sharing insights about money management and good financial practices. "If your advisor has helped you, then let them help teach your kids, too," Steffen said. "It can really help your children to know that they don’t have to make major financial decisions on their own. In addition, a third party can often say what a parent can’t." A financial advisor can also help discuss the particulars of the family’s situation and be a valuable resource to the children in the future.

Inspire charitable giving

Parents may also want to inspire a commitment to giving back. "Your children will react to your generosity," Steffen said. "It can be helpful to take on charitable projects as a family where every member has input on the charity and contributes together. What’s important in instilling charitable values is to let kids have a positive giving experience at a young age."

To schedule an interview with Tim Steffen on this or other wealth management topics, contact Amy Nutter, Baird Public Relations, at (414) 765-3988 or For more tax and financial planning tips and insights, follow Tim Steffen on Twitter @TimSteffenCPA.

About Baird

Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 3,000 associates serving the needs of individual, corporate, institutional and municipal clients. Baird has more than $125 billion in client assets. Committed to being a great place to work, Baird ranked No. 9 on FORTUNE’s 100 Best Companies to Work For in 2014 – its 11th consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. and McAdams Wright Ragen, Inc. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s web site at