Kids & Wealth: To Shirtsleeves in Three Generations?Christopher Briggs, RRC®, Wealth Advisor
There is a saying, “from shirtsleeves to shirtsleeves in three generations,” which suggests that wealth gained by a family can easily be lost in just three generations. As such, many wealthy families are now focusing on teaching children how to manage money to try and encourage its longevity.
Instilling sound financial values at a young age can be relevant for any family to improve financial success. Here are some ideas to get children started on the right path:
1. Start with your Money Message
Cultivating a healthy relationship with wealth may begin by sending a message that may appear counterintuitive: It’s not about the money. Too much focus on wealth can remove a child’s sense of purpose and drive. Instead, define other family values to de-emphasize family wealth. Questions about wealth can create meaningful discussions. For example, if a child asks: “are we rich?”, it may provide an opportunity to discuss the realities of the world. Over 40 percent of the world lives on less than US$2/day, and there are different families: i) those who don’t have enough; ii) those with just enough; and iii) those who have more than enough. Being in the latter group means that a family has enough to meet needs and wants, while still having funds to share.
2. Put Children to Work
Developing independence and a strong work ethic at a young age can prepare children for the real world. Children should have the opportunity to fail. This can start early, such as not taking a child’s homework to school when they forget it, or not bringing forgotten hockey equipment on game day. Kids learn valuable lessons from consequences; you don’t want to disable behaviours that can be carried into the future. Learning the value of a hard-earned dollar is also important, even if a child comes from a family that doesn’t need the money. First jobs can foster solid work habits and help to develop money management skills like saving and budgeting.
2. Teach Kids ways to Manage Money
Children can be taught the difference between needs and wants, as well as the value of saving. If a child is given only a set amount of funds, they can learn to prioritize. When money is earned or received as a gift, consider putting a portion into savings. You can then work with the child to define the purpose for these savings. Older children can be taught about compounding and investing to grow funds into the future.
4. Determine your Family Strategy
Family meetings can be used to identify collective goals and create a sense of purpose. Some experts suggest that family members, including young children, develop a financial, intellectual and social capital goal for the year, documenting and tracking these goals. The family can then review their progress and celebrate their accomplishments together.
5. Give Back
Consider involving all family members in the process of giving back, such as making charitable contributions a family activity by volunteering together or donating in lieu of holiday gifts.
We are Here to Help
These are just a handful of ideas, intended as a starting point. We can provide tools and resources for your situation. By starting early, the rewards can be great: better communication, healthier family dynamics, and the potential for your hard-earned wealth to continue well into the future.