The fear that financial success will ruin the next generation is real. This article offers strategies to ensure that your wealth not only benefits your children but also supports and sustains future generations.
Most of us aim to achieve wealth, yet the fear that financial success might negatively impact future generations is real. It’s a paradox of life, and indeed, money can sometimes hinder children’s sense of perspective, independence, and direction. In some cases, wealth doesn’t last beyond the next generation.
It’s no surprise that clients often ask, “How do we provide our children (of all ages!) with the benefits and opportunities that come with wealth while ensuring they remain responsible and grounded?” Or more poignantly, “How do we ensure money doesn’t negatively affect our kids’ lives?”
There are no simple answers, but we can draw on a few core principles to help ensure your wealth extends beyond the next generation. These include intentionally focusing on values, fostering skills and experience, and striking the right balance between independence and support.
Instilling strong values
Values are fundamental to how we live our lives. Parents can intentionally impart good life values to their children, but it’s crucial to recognise that values are more often caught than taught. Your children will pick up more from seeing the choices you make about how you spend your time and money than they will from what you say.
If you want your children to end up with good values, you need to live those values yourself. As respected psychologist and author, Dr. Kelly Crace, put it, “If I followed you around for three weeks, I could tell you exactly what your top five values are”.
Teaching money skills and building experience
Children need to be taught money skills, but they also need to learn from their own experience, including making mistakes. This is particularly important for teens and young adults.
It’s crucial not to parent with your wallet. Money and time can solve most problems, but money can solve them too quickly. Many families use money (and influence) to allow kids to avoid natural consequences. However, those consequences are what allow them to develop the emotional and practical skills they need to live a healthy life.
Balancing independence and support
American journalist and author, Hodding Carter, once said, “There are only two lasting bequests we can give our children – one is roots and the other is wings”. Children need the roots that come from clear boundaries, strong values, and love. But as children develop into adults, they need to differentiate. They need ‘wings’ – the space and encouragement to chart their own course.
Significant resources can stunt this growth by acting as a shelter from consequences, offering undeserved opportunities and fostering dependence. For instance, paying off their mortgage can rob them of the satisfaction and growth that comes from achieving such a milestone on their own.
Knowing when to discuss family wealth
When it comes to discussing the size of the family wealth, every family is different. However, to ensure your wealth extends beyond the next generation, it’s often best to wait until children have started to establish their own lives and careers before delving into the specifics.
Many families find that significant life milestones – such as attending university, getting married, buying a home, having children, or starting a business – are ideal times to share some of the wealth or match their children’s efforts with financial support. This approach can provide meaningful help at critical junctures while still encouraging independence.
Ensure your wealth extends beyond the next generation
Issues surrounding children and money are relevant for all families, regardless of their economic standing. However, wealth often amplifies everything – both the good and the bad. It can exert a powerful gravitational pull that is both alluring and distracting.
If not properly managed, the very resources intended to help a family thrive can contribute to its undoing. By focusing on values, skills and independence, parents can help ensure that their wealth becomes a tool for nurturing responsible, grounded and resilient children, and that it will be sustained beyond the next generation.