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Did great, great, great grandpa have an iPad? How to teach your children wealth responsibility

Talking to your children about wealth can be enjoyable and preparing them can be fun, but there are serious considerations too. Next gens and family experts Sandy Loder and Evana Lithgow share a host of useful tips and insights.

Talking to your children about wealth can be enjoyable and preparing them can be fun, but there are serious considerations too. Next generation and family experts Sandy Loder and Evana Lithgow share a host of useful tips and insights.

Sandy Loder is founder of AH Loder Advisers Ltd, a specialist family consultancy business that focuses on family businesses, family offices, and financial and entrepreneurial education. Loder is a fifth-generation member of the Fleming family and worked in the family business for 18 years.

At what age should you begin to speak to school age children about great wealth?

Sandy Loder: There are different approaches in different parts of the world. In the case of first-to-second generation succession, Europeans tend to talk to their children at a much later stage than in the US. In the majority of cases, I am not sure European founder parents ever really fully explain the situation until they are on their death bed or have a critical illness. This is different down the generations, as the wealth is starting to be institutionalised and formalised.

My advice on discussing inheriting wealth is to let children be children. Do not burden them with the weight of responsibility until they are mature enough to handle it. With the amount of information that the internet holds, they will soon discover and learn more about their heritage and family wealth. This is learning by osmosis and I think it is a very sensible way for them to slowly learn more and more as they travel through their adolescence.

What are the first steps?

SL: The first step is to give them a debit card that cannot go overdrawn, so they can start to have some autonomy and also learn about managing a regular income of pocket money and earning money for doing chores.

The next step will be whether they start to receive money from a trust. Be aware that the more you give them, the more they spend, and you start to eliminate consequence out of their life. As they become adults, then they will legally be required to sign tax returns and other legal forms, so a conversation around their 18th birthday has to take place.

My advice would be to let them get through higher education such as university and go out into the world to learn new skills and experiences. It is in their late 20s/early 30s that they really start to need to earn an income, or receive a higher level of income, as they will want to buy their own house etc. The more serious conversations can take place then, when they have established their own journey in life. They will be mature enough to handle the added responsibility of inherited wealth.

Should this be done by parents or someone with specific skills?

SL: This conversation can be carried out by parents or professional advisers. Remember, children expect parents to parent and teachers, coaches and mentors to teach, coach, and mentor. Crossing over never works that well. The children should start to meet advisers in their 20s and understand the role they are playing.

What topics should you start with? How do these change as the children age?

SL: The first thing they need to be taught is that they should walk their own journey or climb their own Everest. Success means something different to everybody. It is not necessarily just about making money, although that does help oil the wheels. So go and be successful—help build a team of coaches, mentors, and supporters around them.

I am a great fan of teaching entrepreneurship. It is a fantastic skill to identify a problem or pain in the world and then find a solution and build a business from that. Life is, in many respects, all about problem-solving. However, not everybody is an entrepreneur and records show there are very few self-made second-generation billionaires.

Then they need to learn how to make money and manage that money. They need to learn to live within their own means.

Careers are no longer linear and hierarchical. It is about choosing a direction of travel and moving from stepping stone to stepping stone in a random order, learning skills and picking up experiences. Hopefully along the way they will become more successful as they travel in the direction of their passion. If they follow their interests and passion, then they are likely to be more successful and stick at it for longer.

Wealth dissipates very rapidly down the generations, so children must be aware that each child is not going to be as wealthy as their parents and therefore might not be able to afford quite the luxury that they have grown up with, unless they can go out and generate it themselves.

Are there any pitfalls?

SL: Do not shower your children with money. It is not helping and one of the first things I recommend is to switch off the allowance or reduce it. 

They must have consequences in their lives, much as the founder did. So if you do tell them early on about their wealth, make sure there are consequences. There must be a reason for them to get out of bed in the morning. So many next-generation family members I come across have no hunger or desire to change. 

 

Evana Lithgow is a psychologist with 19 years’ experience. She is the managing partner of Working Minds, a boutique practice focused on succession, transition, change, and growth. Having grown up in a successful family business, Evana brings a unique mix of deep expertise, practical insights, and human-centred solutions to her clients.

Evana Lithgow: When speaking with children about wealth can be better to think in stages, rather than ages. In that sense it is never too late to start. Broaching the subject need not be all doom and gloom either. Over the years I have seen families invent some great ways to engage with children, from making books of wisdom for their children, to developing rites of passage experiences for certain ages, and creating family events such as cousin camps and family dinners.

At what age should you begin to speak to school age children about great wealth? 

EL: Starting conversations with children about wealth is very much dependent on the child, the family, and their context. That said there is a lot that family, carers, and advisers can do to set these conversations up for success when the ‘time is right’. It might sound basic, but the fundamentals of communication and parenting really apply, such as building a strong relationship and understanding of one another. Understand and appreciate the personality and interests of your child and how these are similar or different to you.

Agree with other parental figures and guardians, carers, family members, and advisers how the parents of the child would like the topic approached and why, so that everyone can be ‘on the same page’.

Ensure there is regular connection and conversation time so that opportunities from both sides can be leveraged. This might include telling a little more of your family, or personal, story or your child asking you a question about something previously discussed.

Should this be done by parents or someone with specific skills?

EL: There are real benefits in having more than one person or ‘type’ of person involved in conversations about family wealth. The trick is to have everyone do ‘their’ role so it is clarifying, not confusing.

Parents should make some time to individually reflect on the strengths of their child ahead of any conversations, as well as anything they believe could be ‘worked on’. Parents can then discuss their hopes, desires, thoughts and fears for this process first with each other, then with other carers, family and advisers. This creates an individual plan for their child that meets their wishes as well as any practical considerations from the wider family. Everyone that could be involved needs to be aware of what, when, where, why and how the parents would like the conversations to occur and their specific role and responsibilities in that.

What topics should you start with? How do these change as the children age?

EL: We often talk about going ‘backwards’ to go forwards. Regardless of your children’s age, the most sensible starting point is what is wealth and understanding where the family wealth came from. For example, how, how much, whose side, how long ago it was created, and what has happened since then. This is a fantastic opportunity to tell the family story, as well as your story, and we all love a good story. This creates further lines of enquiry from your child. A six-year-old recently asked a particularly cute follow-up question: ‘Did great, great, great grandpa have an iPad?’.

What are the main points to communicate?

EL: Be careful of expecting more from your children than you expect of yourself, adopting a ‘cookie cutter’ approach by treating your children the same or comparing them—factor in individual differences.

Be wary of having anyone ‘drinking from a firehose’—a little, layered approach often with an opportunity to think, reflect, discover and practice is preferable to a ‘drenching’.

Be careful about doing all the talking—sometimes we get nervous and fill all gaps with words so no questions can be asked. Information isn’t easily or readily digested in these circumstances.

When appropriate, discuss the detail, quantum and mechanics of the wealth so there is no misunderstanding as to what you mean.

Are there any golden rules about broaching the subject?

EL: When talking to children about wealth we believe the ‘how’ is just as important as the ‘what’. Start simple and small—you can always add more information and detail.

Layer the conversations, ideally over a lifetime. It’s an ongoing dialogue, not a ‘dump’, which changes with the ages, stages and seasons.

Be clear about what they can or can’t share and with who and why. Be careful not to give your children a ‘reason not to believe you’—often this isn’t intentional, sometimes as parents we just get asked a question we didn’t see coming or the question is poorly timed from our perspective so we say something to get out of the ‘moment’. 

Ensure you provide a balanced perspective. It isn’t all doom and gloom or burdensome with wealth, but it isn’t roses and rainbows all day long either, as we all have the same human condition.


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