How the Wealthy Teach Children about the Value of MoneyJune 1, 2016
All the effort, planning and sacrifice along the road to wealth is often motivated by a familiar American ideal. Typically, parents would like to provide a secure future for the next generation. That is why it is especially distressing that affluence is a single-generation event for many families that achieve prosperity. Even dynastic legacies can crumble in the span of a single generational transfer of wealth. Given the resources and advisors at their command, how does this happen?
The tired idea that “talent skips a generation” is not supported by evidence and does not explain the phenomenon. Market forces are not always to blame either. Volatility aside, the wealthy have generally fared well during any era of the nation’s history. One reason that families fail in attaining multi-generational wealth is that they overlook wealth transfer and tax mitigation opportunities, diminishing overall wealth. On the other side, inheritors are not always initially adept at budgeting and planning in relation to wealth preservation and lifestyle management strategies.
Families have found that both scenarios can be avoided when the family participates in multi-generational aspects of a sophisticated planning process. This promotes greater financial literacy and facilitates conversations about long-term individual goals and aspirations. From this simple starting point, affluent families can best determine how to use exceptional family resources to promote more effective wealth transfer. For many, this involves creating opportunities for “hands-on” learning experiences instead of merely a theoretical education.
Many of these learning experiences come in the form of philanthropy. Giving back is a tremendous opportunity for families to teach the next generation about the value of money and its impact on the world. Family philanthropy and charitable values are an important part of wealth transfer and a fantastic opportunity for family bonding.
Some families get children involved in the family business from the time they can tie their shoes. This is not necessarily for the sake of productivity. Giving kids a ground-up understanding of the inner workings of the company helps them to understand basic economic principles – as well as the value of hard work. For that reason, it’s not unusual to see young children interning in the mailroom long before they set foot in a boardroom.
Perhaps the most overlooked way that wealthy progeny learn about money is from their peers. In recent years, training and learning opportunities are in abundance. Events often encourage interaction among contemporaries. These forums help families learn from the experiences – and mistakes – of others as they contemplate strategic paths to prosperity.