The job of parenting can broadly be divided into two categories. On the one hand, it’s about giving – making time for your children, providing them with love, attention and understanding, and showing an interest in their activities and passions. On the other, it’s about setting limits – providing structure, giving direction, imposing rules and holding them accountable for their behaviour. These twofold responsibilities can leave many parents floundering somewhere between ‘am I giving them enough?’ and ‘am I being too giving?’.
For high-net-worth parents, able to share with their children not only their love and attention but also significant financial wealth, these questions may induce a particular anxiety – a tricky balancing act between the determination to give their children the best chances in life with fears about creating a sense of entitlement and thwarting their child’s ability to build character and learn important life lessons.
Break down the taboo around money
As in any other relationships, navigating the challenges successfully depends on good communication. Talking to your kids early about the family’s wealth and their responsibilities towards money will set them up for the best chances of success. Crucially, however, conversations about wealth should be age-appropriate – and evolve over time depending on the child’s frame of reference and ability to receive the information.
Budgeting, saving, generosity, debt and entrepreneurialism are all money values that affluent parents can discuss with their children during their formative years. With young children, for example, it’s about finding teachable moments every day: explaining what it costs to buy something or helping them with counting money to give them a sense of what things are worth.
By your child’s teenage years, you can introduce topics such as banking and budgeting – and you may also want to explore investing basics such as equities, how to use debt, or risk and reward.
Later, as they approach the time when they’ll leave home for college or a job, or perhaps as the point in time nears when there will be a significant asset transfer, you should address in greater detail how much wealth the family has, how you accrued your wealth, and how much of that wealth will be passed on to them at what stage in their lives. Normalise the discussion so that it’s not ‘otherworldly’ – it’s their world.
Emphasise the importance of work
One reason often cited by affluent parents for not discussing their wealth with their children is the fear of dampening the child’s work ethic. After all, even if you’ve accrued enough wealth that your offspring would never have to work, gainful employment is about more than just financial reward. By using our gifts and talents to contribute to society, we gain a sense of self-worth. Conversely, without the financial imperative to work, children of wealthy parents may find themselves drifting through life without a sense of purpose.
One way you can set out your expectations about work is by requiring your children to participate in a job – again at a level appropriate for their age. This could be household chores for younger children or paid work for older kids. Even if it’s bringing your teenager into your own office, finding a way for them to earn financial rewards in return for hard graft is a valuable life lesson.
As all parents know, actions speak louder than words. Children benefit from seeing their parents leading active lives – whether that activity is compensated or voluntary.
Pursue meaningful vocations in your own life that align with your values, talents, and interests and that allow you to contribute to the world – even if you’ve taken a back seat from your own business. Share stories and insights with your offspring about the work you do and have done in the past, the jobs you liked and the jobs you didn’t, and what you learned from those experiences.
Instil a sense of philanthropy
Educating your children to be good stewards of the family’s wealth is also about helping them to see beyond the material things they can obtain with money and understand the power of money to have a positive impact on the society around them. Encourage them to regard money as a tool, not a toy.
Those who show the highest level of commitment to philanthropy are generally those who get their hands dirty by taking part in volunteer work. Help your children develop their own generosity muscle through acts of community service or volunteering. In this way, they personally reap the benefits of making the world a better place and enjoy the feel-good effects of giving. Include your children in your philanthropic and volunteer efforts, and they will gain perspective on their own good fortune, as well as positive reinforcement for giving versus getting.
Importantly, even if your family has a tradition of philanthropic endeavours in a certain area or expectations about which values to support, allow your heirs to voice their own ideas about which activities to pursue. Empower them to select and actively shape the work charitable organisations do and experience the difference that money can make.
Play the long game
Throughout all your conversations with your children about managing the family’s wealth, remember that the lifestyle they enjoy is based on your financial success and may not necessarily be the lifestyle they can achieve when they head out on their own. Your responsibility is to prepare them in the best way possible for the life that lies ahead after they’ve flown the nest.
This takes more than just a one-off conversation. The end goal is that through regular discussion, you ensure your heirs develop a healthy attitude towards money that sets them up in the best way possible to use their privileged position as a launchpad towards a fulfilled and secure life.