When you stop and think about it, financial wealth can have a profound impact on individuals and families. Most importantly for parents, the use of their wealth can have unintended impacts on their children.
This series of three blogs is intended to introduce parents to the potential impact of wealth and ways to mitigate those impacts. The first is on what you need to know.
What You Need to Know
Will your children be positively or negatively affected by the financial wealth you share with them?
Increasingly we are hearing parents express concern about the impact of wealth on their kids. We sometimes behave as though wealth is always a good thing. Most of us spend a lot of time trying to increase our share! But the reality is that there are plenty of reasons to be concerned about the negative impacts that wealth can have on young people who don’t understand what it takes to earn it or the ways that it shapes us and our relationships.
The value of wealth lies in its power to expand opportunities and resources that can strengthen families and provide a good life for children. There are extraordinary young people coming from families of means who are thriving and contributing positively to society. There are also extraordinary young people coming from families of means who are floundering amidst the wealth, overwhelmed by abundance and opportunity.
Affluence increases certain risks. There are far too many examples of young people whose lives have been distorted by wealth. The negative impact of wealth can result in a broad range of life problems, which include:
- Lifelong financial dependency;
- Loss of hard won family wealth due to mismanagement or unhealthy lifestyles;
- Destructive values about money such as equating money with self worth or believing that happiness depends upon having all the latest trends;
- Over use of credit, ending in unmanageable debt;
- Family conflict and resentments about money and inheritances;
- Loss of incentive to live a life of substance and meaning.
Gift that it is, wealth apparently has the power to build or destroy. What makes the difference?
We have been studying multigenerational families of wealth for many years, and here’s what we’ve found. Some of the families we have observed have practices that consistently result in generations of children who become creatively engaged in life. They contribute to their families and communities through productive lives. Other families have struggled. Their children are voracious consumers of wealth who have failed to build their lives around a meaningful purpose. In the worst cases, there have been drug and alcohol problems, eating disorders, family alienation and estrangement.
We observed that the successful families have deliberately prepared their children for wealth. Beginning at a young age, they have provided financial education and training, formed their children to have strong values including a work ethic and integrated certain practices into their family life.
This is the first of a series on how to prepare children for living with wealth. We will tackle each of these topics – education, formation and practice – in the blogs that follow. In the meantime, here is something you and your family can do in preparation:
Discuss with your spouse what you’ve done to prepare your children for wealth. What concrete steps have you taken? Where are you succeeding? Where could you improve?
Talk with your children about their views about wealth. What do they think money is for?
We originally wrote this series of blogs on “Raising Children in a World of Wealth” for our friends at Highland Capital. Highland Capital is a wealth management firm that is dedicated to not just managing their client’s money, but also are invested in helping them live fully. Read Part 2 here.
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