When To Break It To The Kids That They're Filthy Rich

Rich kids usually have a pretty good idea that their families are wealthy.

Maybe the Gulfstream tipped them off.Or the fourth home in Aspen. Or the Elton John performance at their 16th birthday "destination party" held at the Esperanza in Cabos.

But wealthy kids don't learn how wealthy their families are until—well, sometimes after their parents die.

A new study from U.S. Trust suggests that millionaire parents may want to start a little earlier. The study, part of U.S. Trust's Insights on Wealth and Worth series, found that very few parents believe their kids should know about the family's wealthy before the age of 25.

About half say the kids should be told when they're between 25 years old and 34 years old. About one fifth believe the "kids" should wait until they're at least 40 years old to learn the numbers.

The study found that more than half of the parents had disclosed "just a little" about their family wealth to their kids and eight percent have disclosed "nothing at all."

Why are parents so tight-lipped about their money? Most say it's an "overall aversion to the topic, having been taught not to discuss wealth with anyone." The second reason, according to the study, was that they didn't want to deprive their kids of a work ethic.

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Keith T. Banks, president of U.S. Trust and Bank of America Wealth Management, said that there is no magic age for telling kids about their wealth. He said the decision of when you tell them—and how much to tell them—should be specific to each family.

"What you disclose and when you disclose it is a very personal decision," he said. "A lot depends on the children. And for some, maybe 40 is the right time."

The more important issue is when to prepare the kids to manage their wealth, he said. The ideal age for starting wealth-education programs for kids is when they turn 20, or just before they graduate college, he added. U.S. Trust runs its own "Financial Empowerment" program to educate inheritors and investors and the program is generally designed for people between the ages of 20 years old to 30 years old.

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Banks said that age 20 is "the age when they're most receptive and when they're about to go out into the job market."

There's another issue, however, that parents should consider. It's called the Internet. Specifically, Google and Zillow and all the other sites that would allow a kid to piece together a rough picture of the family's net worth or their family's private company. Parents may think they're keeping their kids in the dark. But they're really just practicing a form of family wealth denial. Eventually the kids will find out—and it may not be in the way the parents prefer.

Of course, not all families have obvious trappings of wealth. There are plenty of stories of quiet, simple families having vast amounts of wealth that no one knew about.

Still, even if parents don't give their kids "the number" for their wealth, they should at least give them the skills and the values to manage it well.