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Why It's Parents' Job to Teach Their Kids About Money

The Street logo The Street 08/08/2015 Gregg Greenberg
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NEW YORK (TheStreet) -- Many parents go to great lengths to avoid the topic of money with their children, but that's the wrong approach, said Linda Davis Taylor, author of The Business of Family.

"Families spend a great deal of time making money and thinking about the actual dollars, but our families don't often understand our motivations and what led us to our dreams," Taylor said. "Ultimately, it's another job teaching the family about what it stands for."

Taylor is also CEO and chairman of Pasadena Calif.-based Clifford Swan Investment Counsel. Prior to her investment counsel career, she worked at several colleges.

Because of her experience in academia, Taylor said she knows the failings of American students in the subject of personal finance. That's why she thinks parents should teach their kids about the responsibilities that come with wealth.

"There is really not a place in our world where financial education takes place," Taylor said. "It's not the job of our schools, so the job really falls squarely on the hands of families, but we don't really think specifically about how to do that. As a result, kids don't have an awareness of what dollars and cents really mean."

Taylor added that a major reason why the old adage "shirt sleeves to shirt sleeves in three generations" continues to maintain resonance is because families, like businesses, need to continue to build wealth. And without a commitment to creating more wealth, "ultimately the money is going to decline."

Of course, not all children desire to follow their parents into a family business. Taylor said that is often preferable, as long as all the family members come to an understanding about their roles in the family business whether they are working directly for it or not.

"Family leaders need to be open-minded and realize that it's a shortcut to force the business on a family member who really doesn't have the skills and talents," Taylor said. "Ultimately it won't be good for the business either."

Finally, she said families shouldn't hesitate to bring in a trustee of financial advisor to advise them on the generational transfer of wealth.

"We know that trillions of dollars are changing hands, so I believe that it does not have to be viewed as a weakness, but rather a strength to bring in outside resources just as you would in your company," Taylor said. "You don't always have the expertise inside your firm to develop it, and the same is true on the business of family."

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