While creating wealth is challenging, keeping that wealth is often the bigger challenge. An article titled How to Beat the Midas Curse had some sobering statistics on wealth destruction: 6 out of 10 families will lose the family fortune by the end of the second generation, 9 out of 10 by the end of the third generation.
Why? According to the article, the reason is that parents generally do not sufficiently prepare their offspring to handle wealth. They want their kids to have an easier life and avoid experiencing the hard work of making money. Unfortunately, shielding the children has an unintended effect of creating a poor understanding of how to handle money.
One way to address this is to train ourselves and our children to be stewards of the family wealth.
Have family discussions about money. This is difficult, but important, to do. Conversations between the parents should occur first, then with the rest of the family. Goals and plans should be developed for the family. The basis for decisions involving money should be explained to children.
Teach children how to handle money early. Give children responsibility for their part of the family money. Provide allowances and teach them to save, share (i.e. donate to charity) and spend. Let them make choices on purchases they can make and on investment of their savings.
Create a mindset of wealth preservation. Be future focused and think what is needed to have the family wealth last for two, three and even more generations. Learn about (or get professional advice) on proven options (e.g. trusts) that work. Put some of the options in place.
I know that some readers may think that it is silly to think out several generations, when one may not be here. For me, the values and stewardship mentality, more so than the money, are the great legacy that can be left to my descendants.
For more posts on Crossing Generations, check back every Thursday for a new segment.
Photo Credit: morgueFile.com, Laura Ashly
Why? According to the article, the reason is that parents generally do not sufficiently prepare their offspring to handle wealth. They want their kids to have an easier life and avoid experiencing the hard work of making money. Unfortunately, shielding the children has an unintended effect of creating a poor understanding of how to handle money.
One way to address this is to train ourselves and our children to be stewards of the family wealth.
Have family discussions about money. This is difficult, but important, to do. Conversations between the parents should occur first, then with the rest of the family. Goals and plans should be developed for the family. The basis for decisions involving money should be explained to children.
Teach children how to handle money early. Give children responsibility for their part of the family money. Provide allowances and teach them to save, share (i.e. donate to charity) and spend. Let them make choices on purchases they can make and on investment of their savings.
Create a mindset of wealth preservation. Be future focused and think what is needed to have the family wealth last for two, three and even more generations. Learn about (or get professional advice) on proven options (e.g. trusts) that work. Put some of the options in place.
I know that some readers may think that it is silly to think out several generations, when one may not be here. For me, the values and stewardship mentality, more so than the money, are the great legacy that can be left to my descendants.
For more posts on Crossing Generations, check back every Thursday for a new segment.
Photo Credit: morgueFile.com, Laura Ashly
This is not financial advice. Please consult a professional advisor.
Copyright © 2007 Achievement Catalyst, LLC
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