Between $41 trillion and $136 trillion of accumulated assets will pass from one generation to another by the year 2052, representing what may be the largest intergenerational wealth transfer in American history. Along with this transfer of assets comes a transfer of values as one generation seeks to prepare the next for managing wealth responsibly.
There are certain commonalities among parents trying to raise successful children. For wealthy parents, however, the challenges of raising children against a backdrop of excess are unique. Among those challenges are:
- How to instill a sense of motivation in the absence of economic necessity.
- How to manage social pressure, complex sibling relationships and an almost unavoidable sense of entitlement.
- How to ensure that children find meaningful pursuits that will bring a sense of purpose and worth to their lives.
From a series of interviews with wealthy parents and children raised in wealthy families come the following five recommendations:
1. Don’t ensure the future.
Many children of wealthy parents say the best thing their parents did was not making them too comfortable. A recent study by Barclay’s Wealth Management supports this, showing that more than one-third of wealthy families surveyed feared that leaving large sums of money to their children would keep them from accomplishing their own goals in life. Moreover, those parents who inherited their wealth were even less likely to pass on large sums than those whose fortunes were earned. And, 60 percent of those with more than $10 million in assets said they have stipulated that a child must complete a college education or hold down a job for a specific length of time to collect an inheritance.
2. Lead by example.
The son of one of the highest-paid chief executive officers in America said his father’s treatment of people was a defining factor as he grew from child to adult. “I watched my father and saw that he was respectful to everyone. In contrast, I observed how many of his friends used their power to belittle or berate others.” Many successful parents of wealthy children say they put a stake in the ground as it relates to certain values and work hard to consistently and consciously demonstrate these behaviors.
3. Set limits for yourself.
Most parents, and especially wealthy parents, establish limits for what their children may have. Yet, many do so even as they themselves live lavishly or at least very comfortably. As one former chief executive officer of a Fortune 500 company describes it: “We had access to the corporate jet and could afford to fly first class, which my wife and I greatly preferred. But on many family vacations, we flew coach and did not complain. Nor did we make it clear we were doing it to instill a certain appreciation for what we had. We did it frequently enough that it just was how we sometimes traveled, like a lot of other people.”
4. Start charitable giving early.
Even young children can learn to help others. Make family volunteerism a non-negotiable activity. Encourage children to give a portion of their allowance to a charitable cause of their choice. Recognize the interests of children and help them identify organizations that fuel these interests. Carve out time for charitable events or activities with which children can identify and that are appropriate for their age.
5. Help children discover their passion.
Help children identify the factors that motivate them to succeed. For some, it is a deeply held passion about a certain subject. For others, success itself is motivating. The greatest gift parents can give their children is to help them discover who they are and what they are capable of accomplishing. Their identity should not rest solely on what they have.
Finally, and perhaps most importantly, parents should consider the legacy they leave to their children as much as they consider the impact an endowment has on favorite philanthropies. Make family governance a priority. Have collaborative conversations with multiple family members about the transfer of wealth. Empower children by making them feel that their input in the family’s plan is as important as your direction. This will help ensure that your planning and teaching will take root and leave a legacy for the next generation and those to come.
Source: Article courtesy of the Family Office Exchange (FOX), which is a definitive source of information and best practices associated with the business of managing family wealth. The strength of the FOX network is derived from the collective knowledge and experience of over 500 FOX members. Mirador is a member of the FOX network of advisors and family offices.
Fifth Third Bank does not provide tax or legal advice. Please consult your tax adviser or attorney before making any decisions or taking any action based on this information. This information is provided for educational purposes only and does not constitute the rendering of tax or legal advice.
Fifth Third Bancorp provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and a registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Securities and investments offered through Fifth Third Securities, Inc. and insurance products:
Are Not FDIC Insured | Offer No Bank Guarantee | May Lose Value
Are Not Insured By Any Federal Government Agency | Are Not A Deposit
Insurance products made available through Fifth Third Insurance Agency, Inc.
© 2018 Fifth Third Bank