Beyond Money: Focus On the Future of Family Wealth

In wealthy families, the preservation and responsible use of wealth goes beyond dollars and cents. Talking about wealth and grounding decisions about family wealth in values create a foundation for trust and understanding within a family. In this article, we explore why intergenerational communication about wealth is essential and offer a roadmap for families to clearly define, live, and share their values around wealth.

The Story of Family Wealth

For years, many wealth advisors told a story of family wealth using the old adage, “shirtsleeves to shirtsleeves in three generations,” quantifying the potential loss of capital with the “70% rule” — citing (questionable) data that over two thirds of wealthy families lose their wealth by the second generation due to lack of trust and communication in families.¹

The story of intergenerational wealth, however, is more nuanced and more complicated than the false dichotomy of preserving wealth or losing it. Wealth is a means to an end — having great wealth is not good or bad unto itself as money has value but no values. Rather, it is a tool to create opportunity based on the values and priorities of those who control it. As the thoughtful authors of Wealth 3.0 put it:

Wealth is, essentially, a vehicle for learning and adaptation, for creating conditions for the family to thrive over the long run, whether or not the money lasts. It increases the options and opportunities available to the family in service of the greater well-being.²

Increasingly, families are focused less on the stewardship of wealth, and more so on how it will impact future generations. While wealth can be a source of potential division or strife within a family, often when family members are uninformed or misaligned, it can also be a powerful positive force. So how does a family ensure wealth is used to increase opportunity and sustain familial relationships?

It starts with a focus on what the family values most and a commitment to articulate, augment, and bring those values to life. As Ellen Perry writes in A Wealth of Possibilities:

Strong, healthy families generally have well-defined, clearly articulated, life-affirming values. In such families, values are discussed openly, lived enthusiastically, constitute the organizing principle of family life, and define the nature and quality of many family relationships.³

While it is important to educate younger generations on managing money, it is also critical to instill a deep understanding of the values that drive the family’s financial decision-making.

The Barriers Families Face in Discussing Money

Despite knowing that communication about wealth and values is important, many families shy away from these conversations. Often, parents are unsure how to answer their children’s questions about money, especially when faced with direct inquiries like, “How much do we have?” or “What will I inherit?”

One way to handle such questions is to turn them into opportunities for dialogue: “That’s an interesting question. What prompted you to ask?” By digging deeper into the motivation behind the question, parents can foster open communication. As children grow older, the conversations can evolve. For example, asking a question in return — “How do you think the answer to that question might change your view of things?” — can provide valuable insight into a child’s perspective.

Some parents assume that their children will naturally understand their values simply by observing their actions. However, without the context or explanation behind decisions, children may not fully grasp the significance of their parents’ behavior. This is where intentional communication comes in — showing and telling are equally important.

Financial Literacy Isn’t Enough: The Importance of “Why”

A common mistake in communication about wealth is focusing too heavily on the “how” of financial literacy, such as how to fund a 401(k) or what a trust is. While this knowledge is helpful, it doesn’t address the deeper question of why. Why do we save? Why do we invest? Why is financial planning important?

It’s not enough to explain the mechanics of wealth management, families must also reveal the reasoning and values behind their decisions. The “how” and the “why” must go hand in hand to ensure the long-term preservation of wealth and values.

Step One: Reflecting on Your Family’s Wealth Story

Understanding your own perspective on money begins with reflecting on your family of origin’s financial history. To understand how your values around money have evolved, it is helpful to look back at the experiences that shaped them.

Start by creating a timeline of significant events in your family’s financial history. Think about the people and decisions that have influenced your views on money. Once you’ve mapped this out, ask yourself:

• What messages about money did I take from these experiences?
• What key financial decisions did my ancestors make? Do I agree with those decisions?
• What lessons have I learned from these stories that are relevant to my wealth today?
• What part of this history should I pass on to future generations?

This exercise will help you uncover the deeper motivations behind your wealth choices and serve as a foundation for sharing your values with others.

Step Two: Aligning Your Actions with Your Values

We all have values, but articulating them clearly can be challenging, so look at how you are spending your most valuable resource — your time. Even if you have not explicitly defined your values, your actions likely reflect them. Look back at your calendar to see where you are investing your time and energy. What causes, organizations, or communities do you prioritize? Where (and with whom) are you spending your nights and weekends?

Seeing a parent make a hard decision or sacrifice often speaks louder than words. For example, I learned the value of reliability and compassion from my father when he would put on a suit in the middle of the night to go to the hospital to care for patients who needed him. However, you might also help your kids interpret what they see. For example, when attending an evening meeting instead of staying home, you might explain that following through on commitments is important, even when it’s inconvenient.

The benefit of aligning our actions and values is that it makes us more resilient. More simply said, doing the things we care deeply about makes us feel good, making it more likely that we are able to repeat those behaviors, even when there are challenges. The same is true of values-aligned wealth plans; they often endure for the long-term because they reflect what the family cares most about.

Step Three: Sharing Your Family’s Values

Once you’ve identified the values that are motivating you, write them down. The next task is figuring out how to communicate these principles to the next generation.

Here are a few strategies on how to approach these important conversations:

1. Tell Your Stories
Attach stories to each of your core values that explain their significance. Storytelling is one of the most effective ways to communicate values. A story can offer context, emotional connection, and lasting impact — and our kids often enjoy hearing about our childhood experiences.

The story of where the wealth came from is especially important for kids who were too young (or not yet born) to be aware of the hard work and commitment that their ancestors invested — bring this origin story to life for them.

2. Wait for the Right Time
Effective communication is all about timing. Choose moments when your family is naturally open to these conversations. A quiet family meal or a time when your children express curiosity can be ideal. Don’t force these conversations. While big family holidays might seem like an appropriate time for reflection, often there are too many distractions or heightened emotions to connect successfully.

3. Create Family Traditions
Values are often communicated most effectively through actions. Establish traditions that reflect your family’s values, such as taking time before meals to express gratitude. Shared experiences not only instill values but also create lasting memories that reinforce the lessons you want to teach.

4. Preserve Your Story
If you feel that the time isn’t right for an in-person conversation, consider recording your stories for future generations. Writing them down or even creating audio or video recordings can serve as a powerful gift to descendants, especially those you may never meet. These stories become a part of your family’s legacy, offering guidance for years to come.

The Future of Your Family’s Wealth

Passing down the love, values, and lessons that have shaped your family is just as important as transferring wealth. By openly communicating the “why” behind your decisions, you ensure that your family not only inherits financial assets but also the wisdom and values that will ensure that wealth has a positive impact on your family for generations to come.