Teaching Your Kids to Be Rich
Getting rich is hard enough. But teaching the next generation how to be rich is tricky, too.
So says Liz Moyer in her recent Wall Street Journal article for which I was interviewed and quoted. This interesting article focuses on family wealth and its impact on the beneficiaries and heirs.
Many wealthy parents worry that fortunes will be squandered and their children’s lives, instead of being eased by money, will be made more complicated or less productive. Some 57% of the respondents to a 2013 survey … didn’t think their kids would be ready to handle being rich until they were 25 to 34 years old.
My contribution to the article was the advice to Tell the Rags-to-Riches Story. Families have to tell the story of where the money came from. Kids are so insulated from how it got created in the first place. By the time the youngest generation arrives, the houses are often already large, the beach house is well lived-in and the club memberships have been long secured.
Show them where it all started – and be sure to mention the mistakes and failures along the way. It’s hard for kids to grow up in a house where they think their parents are superheroes.
I also offered that the kids should be informed and educated about the family wealth, and finance in general. A phone call by a trust officer on an heir’s 21st birthday isn’t the way to break the news that a sizable fortune awaits. The conversation should begin at least a decade earlier, and introductions to the trust officer and the advisers should start in the early teen years.
The surprise never works, kids are blindsided and have no idea what to do.