Most people believe that their children are among the greatest goods in life, and they would do anything for them. This love for our children sets up one of the greatest paradoxes of family wealth: Many parents work day in and day out to amass wealth for their families, and at the same time they fear that their financial success will ruin their children or grandchildren.
In the light of this paradox, it is not surprising that some of the wealthiest people at present are pledging to leave their descendants only a relatively small percentage of their financial assets. We have generations of evidence that a financial inheritance can inflict great harm on its recipients, including a poor sense of self-worth, difficulty establishing healthy relationships with others, substance abuse or addiction, or a general sense of airy insubstantiality.
Yet, as real as these dangers are, “giving it all away” is not the only solution.
The chapters in this section take on some of the thorniest questions on how to make sure that money benefits rather than harms those we love most.
Dr. Suniya Luthar points out some of the troubling behaviors that an environment of success can encourage in young people, as well as specific practices parents can adopt to address those dangers.
Beyond not falling prey to dysfunction, independence is what all parents want for their children. Although children from poor or even middle-class families are forced by necessity to make their own ways in life, wealth can easily encourage dependency. Jill Shipley offers concrete practices parents can use to promote independence. Coventry Edwards-Pitt shares key considerations in promoting financial literacy, which importantly begins with personal values, not the knowledge of financial terms.
Financial literacy is a theme that runs through several of these essays. Dr. Lee Hausner raises it along with very practical considerations around when to share money with children or grandchildren, how to manage the use of trusts in making such gifts, and what to do when your recipients themselves are unequal in their abilities to make (or keep) money. Peter Evans takes on similar questions, with a focus on ways that family members can learn about how they learn – to make this exercise of helping children integrate wealth into their lives all the more productive.
Although independence is perhaps the highest goal of parenting, parents also hope that their children find strength and joy in being interdependent with the rest of their family. Two other essays explore this delicate balance. Kelin Gersick takes it up in the context of family governance, explaining how the family landscape often looks so different to parents and to children and how to bridge that gap. Dr. Dennis Jaffe shares ways that parents can engage their adult children in the family enterprise, specifically through the use of well-designed family meetings. (Several of the essays in our section “Making Shared Decisions” also contain insights on designing effective family meetings.)
Finally, a word on the title of this section: within the world of family wealth, many advisors use the term next generation to identify the children or grandchildren of their clients.We and our contributors have tried to nudge gently against this term, in favor of the “rising” generation. We have heard from many family members that the word “next” makes them feel less important, compared with the impressive wealth-creators who, presumably, came “first.” In contrast, “rising” honors the opportunity that every generation has to grow, define itself, and flourish. That is a hope that all parents share.
Chapter 21 – How Do You Raise Responsible, Independent, and Productive Children (versus Entitled Trust Fund Babies)?
Chapter 22 – How Can You Help Children Thrive in a World Focused on Success?
Suniya Luthar and Nina Kumar
Chapter 23 – How Much Money Should You Leave Your Children, and When?
Chapter 24 – How Do You Start a Family Conversation About Financial Inheritance?
Chapter 25 – How Can You Avoid the Negative Impacts of Giving Money to Family Members?
Chapter 26 – How Can Your Family Encourage Financial Literacy in Every Member?
Chapter 27 – How Can Families Support Both Individuality and a Shared Dream?