Pete the Planner: Don’t share details with kids until you have to

I’ve thought about this first issue for nearly 20 years and—despite the fact that I’m a details guy—I’ve been unable to convince myself that parents should provide the intimate details of their financial life to their adult children, unless doing so in a security capacity based on cognitive-decline concerns.

I understand all the arguments for disclosing the gory details such as account balances, but I’ve yet to witness a situation in which that disclosure didn’t backfire in some capacity, and understandably so. I believe you are uniquely capable of dealing with the realities of your own financial life because you have been directly involved with every moment of struggle and every moment of success. Those very close to you—even well-adjusted adult children raised by you—will struggle to contextualize your balance sheet, which often becomes a detriment to their financial existence.

Back when I was a financial adviser, I would always cringe at the “My parents have plenty of money, which we’ll eventually inherit” discussion. Why? Because the people who said that often had the finances reflecting that anticipatory sentiment. In other words, they were experiencing moral hazard. Moral hazard is “a lack of incentive to guard against risk where one is protected from its consequences.” These folks walked around with a Get out of Jail card stapled to their sleeve. Sure, share your advisers’ contact information, the location of your estate documents, and even your intent to fund some charitable endeavors, but I’d shy away from dollar signs unless you’re reading them in for Power of Attorney purposes.

Frankly, I think this is a simple case of measuring the potential negative outcomes of disclosing your dollar signs against the potential positive outcomes of disclosing your dollar signs. Will it bring you closer as a family unit? Probably not. In fact, it’s more likely to create crevices of divisiveness. This assertion isn’t accusatory in respect to character flaws. Instead, it’s a reminder of how different humans react differently to varying levels of resources based on one’s own personal level of resourcefulness.

As to your point about “needing to know all of this at some point,” I’m not sure it matters to know it before it matters. Yes, you want to employ an appropriate tax strategy and, yes, you want your charitable bequests honored, but the rest definitely feels like a bridge they’ll cross when they get there.

The second issue is more easily solved, and the solution itself has been a lifesaver for me. You’re only setting yourself up for disappointment when you expect a person very close to you to reflect the same level of excitement you happen to have about a moment or concept. I know how thrilled you must feel about your donor-advised fund, because it truly is inherently exciting, especially to a money nerd like me.

However, if you’re at a 10 on a 10-point scale of excitement over this fund, then it’s virtually impossible for anyone else to be anything higher than a 5. Don’t put yourself in a position to experience disappointment because they’re not closer to your 10.

Sharing the intimate details of your financial life with family can feel pragmatic. And in a way, you might even think sharing will provide some satisfying level of validation. If, after you test the waters a bit with small attempts at engagement, you’re not met with the reciprocation you were looking for, take the pressure off everyone involved and pull back.•

__________

Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to askpete@petetheplanner.com.