Leaving a Legacy that Lasts Generations
The cure for the entitlement illness is gratitude.
For affluent families, raising kids without spoiling them is a huge challenge. Here are some practical bits of advice, and some questions you can talk about with your wealth manager.
You may have heard the saying, “shirt sleeves to shirt sleeves in three generations.” In Asian cultures, they say “rice paddies to rice paddies in three generations.” In statistics, they say that only 3% of the fourth generation inherits any meaningful amount of wealth created by the first generation. Why is that?*
The first generation creates the money. The second generation keeps the family business going, or at least preserves the money. They have their parents as role models. But the third generation grows up spoiled, entitled, and spends the family fortune. This story is repeated throughout time, and across cultures.
Conversations with your wealth manager at A&I can help you avoid some of these problems. In many cases, we are the only person that you have to talk to about money and your concerns. Like a family member, who knows some of the secrets and loves you anyway, the wealth manager is also a fiduciary, with no (or minimal) conflicts of interest with your legacy. We ask some questions to help you get things going.
Often, the best way to avoid family conflict is to have an honest conversation. In fact, I am going to make a statement, based off of only my own experience, and the experience of my colleagues, that the more transparent you are in your family about money the higher the likelihood of a healthy family legacy. It looks like this image below:
How to Have a Family Conversation About Money
Remember, money in alignment with our goals, values and relationships is an unalloyed good for the world. It is worth the effort to start these conversations with your kids sooner rather than later!
Your wealth manager has a number of questions to help you have a meaningful family conversation. Here are a handful of questions to get you started:
- What is important to you about money?
- What are your earliest memories of money?
- What was your best financial decision?
- What was your worst financial decision?
- What do you want to do for your children? For your parents? For your other relatives?
- What do you want to do for the world at large?
- When you think about your money, what kinds of thoughts, feelings or concerns come to mind?
*Source: An often-quoted statistic from the Williams Group. Only 3% of families inherit the wealth of the first generation. However, this rule is also in question. Click here to read an essay that describes, and criticizes, the research.