Many of the mature clients I work with are concerned that their heirs will never fully appreciate all of the sacrifices they’ve made to provide for their family.  Most of my clients did not inherit their wealth.  They worked for it, taking a lot of risks along the way.  There is often a huge gap between the way they view money and the way their children and grandchildren view money.  This gap is a source of frustration, conflict and anxiety. 

No two generations are likely to see eye-to-eye on anything.  Yet, I believe there is a great deal that we can do to unify a family, even a multi-generational family, around money values.  These efforts can reduce tension and increase family unity.  After having coached hundreds of clients facing this dilemma, I’d like to share five strategies that will help you build family values about money. 

 

FIVE STRATEGIES TO FOSTER FAMILY FINANCIAL UNITY

If you want to help your family create a more unified set of values and a common vision for money, I recommend these fives strategies:

  1. Tell your story – repeatedly.
  2. Make your heirs earn it.
  3. Don’t rescue them unless it’s absolutely necessary.
  4. Teach them how to manage money, especially when they’re young.
  5. Prize financial independence so they expect to stand on their own two feet.

Let’s take a closer look at these ideas. 

profile picture for Wayne Janus
"I take great pleasure in helping my clients find better and more tax efficient ways to pass their wealth on to the ones they love and the charities about which they are passionate."

MY FATHER’S STORY – PART 1

I want to tell you a bit about my father before we look at the five strategies.  His life and his example shaped me in more ways than I can describe.  The affection and the bond between us grew stronger as the years passed.  This came about, in part, because of the way my father handled money.  I describe more about this below in My Father’s Story Part 2. 

During WWII, he had great responsibility.  He commanded two hundred men and sometimes made decisions that had life or death consequences – both for him and for his men.  He took that responsibility seriously and it weighed on him even after the war.  But when he returned home, like so many men of his generation, he struggled to get a decent-paying job.  For far too many veterans, the skills that the military valued did not necessarily translate into skills valued in civilian life. 

This meant that my family, for all intents and purposes, was poor.  We never seemed to have any money.  We struggled to pay the rent.  We had to watch our food budget very closely.  My mother found ways to make things work, but it wasn’t easy.  That was my home life as a child.  The wolf was never far from the door. 

This meant that by the time I graduated from high school, there was no money for college.  This was not a surprise to me.  I was well aware that my parents couldn’t pay for college.  I knew that if I wanted to go to college, I had to find a way.  It was up to me.  My journey would not be easy. 

I worked and saved for two years and combined those funds with what I had saved from high school.  This paid for my first two years of college, but it was not enough to get me all the way through.  I left college to join the Air Force and served for four years.  This allowed me to qualify for the GI bill, which paid for my last two years of college and a portion of graduate school. 

After a few years of working hard for clients and growing my career, it became obvious to me that my children would have a very different kind of home life.  They wouldn’t worry about money.  But this left me with a new worry.  How do I help my children appreciate what money means to me?  How do I help them avoid the painful experiences that I had as a kid while also making sure that they don’t grow up entitled and expecting everything to be handed to them?  How do I strike that balance? 

Over the years, I’ve had a lot of clients struggle with that same situation.  I’ve seen people try all sorts of things to strike the right balance, including putting incentives and limits in their wills.  But I’ve never seen anything work better than the five strategies I’m about to describe.

 

TELL YOUR STORY - REPEATEDLY

Most of my clients, like me, were not born with a silver spoon in their mouth.  Many of them came from difficult circumstances where they had to make a dollar stretch a long way just to pay the bills.  One such client was born on the streets of Italy and eventually migrated to the US.

Even though he came to this country penniless, through long hours of hard work he became a multi-millionaire.  He used to tell me how frustrating it was for him that his children didn’t seem to appreciate or understand everything it took for him to provide the lifestyle they had become accustomed to. 

Eventually I asked him – “are you telling your children your story – at all?”  As it turned out, he didn’t like to talk about the difficult times when life had knocked him down.  He always found a way to bounce back because he was resilient and tough.  He wasn’t a quitter.  His kids saw that character trait, but they didn’t really understand how he had developed it. 

I find this more often than you might realize.  Many affluent people don’t like to talk about the hard times in their past.  They want to put that behind them.  Other people don’t want to seem like they’re trying to evoke sympathy.  Sometimes they don’t want to be seen as the doddering old duffer in the room, wandering through yet another story from their childhood.  This is a mistake.

It is virtually impossible for your heirs to understand your sacrifices unless you tell them your story.  Think for just a moment about your own childhood and the circumstances you were born into.  Think about what you valued and what gave you joy as a child.  If you are like most of my clients, the material things in your life were simple, few and inexpensive.

Now think about the circumstances that your children and grandchildren were born into.  What do they value and what seems to bring them joy?  What sort of material things are in their life?  How do those things and their lifestyle compare to your childhood experiences?  I’ll wager that there is a huge gap between them. 

Do you believe it is reasonable that they could ever hope to understand your values regarding money unless they hear your story and understand what it was like for you along your journey?  I don’t think so.  I have some recommendations to make here about how and when to tell stories.

If your heirs are working adults with their own children, they’re likely contending with a hectic schedule.  So be selective about when and where you tell them a story.  Maybe choose a quiet restaurant where you can be one-on-one.  You might also set aside a “story time” during a family get together or on holidays. 

If you’re not comfortable telling your story, I’d advise you to hire a story coach.  These people can help you select events from your life that convey your values without being preachy.  Here are some ideas to get you started:

  • What was your most prized toy or material possession as a child?
  • What was the most difficult experience of your childhood?
  • When did you earn your first dollar, how did you earn it and how did you spend it? 

Telling your story helps your heirs understand why you feel the way you do about money. 

 

MAKE YOUR HEIRS EARN IT

One of the biggest mistakes I see affluent parents making is simply giving their children money or material goods.  I don’t believe that this fosters a sense of appreciation for things that cost.  There are so many situations where you can help your heirs learn the value of a dollar by making them earn it.

For example, my son Ryan is a wonderful musician.  He was always fascinated by music and by the technology that makes modern music.  Of course, I wanted to support his talent.  As a teenager he came to me and was excited about a new keyboard that had all sorts of bells and whistles.  He had done his research and knew exactly what he wanted.

But I didn’t buy it for him.  Instead, I made him a deal.  I told him that I’d pay for up to half of it, as long as he earned the money for the other half.  I could see him doing the math in his head.  He walked away from that conversation with a plan.  A few months later he came to me with the money he’d earned from a job, from savings and from not spending money given to him as a gift during holidays and his birthday.

We bought the keyboard and he loved it.  Within a short time, I could hear how his capabilities as a musician had grown.  It was a great investment.  But the best part is how Ryan valued and protected that instrument because he had to work for it.  He had skin in the game.  He is now a professional musician in an elite Air Force band.  If you want your heirs to value what you do for them, make them earn it. 

 

DON’T RESCUE THEM UNLESS IT’S ABSOLUTELY NECESSARY

This is a tough thing for parents.  When our kids get into trouble, our first instinct is to rescue them.  But I don’t believe that our heirs become resilient, responsible or completely stable as long as they know that we’ll ride in on a white horse and save the day. 

The client I mentioned above had a history of saving his children from the consequences of their own behavior.  It wasn’t long before they got into bad situations where he couldn’t rescue them.  Please don’t make this mistake.  Don’t get me wrong.  There are definitely times when a rescue is necessary.  But far too many wealthy people rescue their children when it’s unnecessary.  And remember – there will come a time when we are no longer there to rescue our children.  What happens then if they haven’t developed the skills to solve their own problems? 

Here is a question to ask yourself.  Do I want to do things that steal from my children their opportunity to become the best that they can be?  Struggling teaches young people to be strong, resilient and resourceful.  When they solve their own problems, it increases their self-confidence and self-reliance. 

 

TEACH THEM HOW TO MANAGE MONEY WHEN THEY’RE YOUNG

I work with an organization that teaches young people financial literacy.  The curriculum shows them how to delay gratification and handle money effectively, so they achieve independence.  Our schools have left this out and that’s a shame.  So many young people seem to know so little about money. 

Young people who go through this financial literacy program are sometimes asked – “what did you learn?”  One young lady replied – “If you want to live it up later, you can’t live it up now.”  I think that’s well said.  Part of the emphasis is that a piggy bank should have four slots:

  • Save
  • Spend
  • Invest
  • Charity

Save is the money set aside for a short-term goal, say a year or so down the road.  Spend is the money we use to pay bills and buy things today.  Invest is the money we save and lay up for the future, for things we might want ten years from now.  Charity is the money, but not exclusively money, that we give to organizations who do good things that we believe in. 

Part of this education is learning to give back to the community either by working at a soup kitchen, giving to the Salvation Army or something similar.  This builds character and helps young people see how people without many material blessings have to live.  It makes them think about what they have, by comparison. 

As a parent I am so proud that all three of my sons have achieved financial independence.  None of them have lingering charge card debt.  Moreover, each of them is dedicated to giving back to the community.  They donate money but more importantly, they give something really valuable……their time.

Most mature adults, especially those who’ve accumulated wealth, already practice some form of the four-slot piggy bank.  But most young people have no idea how to do this unless someone teaches them.  If you want your heirs to appreciate all they have, teach them financial literacy. 

 

PRIZE FINANCIAL INDEPENDENCE SO THEY EXPECT TO STAND ON THEIR OWN TWO FEET

Some children or grandchildren from wealthy families NEVER expect to be completely financially independent.  I find this to be shocking.  In many instances, their parents or grandparents fostered that expectation.  I believe this is a mistake.  Why do I say this?

As a financial advisor, I have seen people inherit large sums of wealth that actually hurt them instead of helped them.  Usually these people never learned to appreciate the value of a dollar or to live on a budget.  Once they got the big money through an inheritance, it only made their bad habits worse. 

I believe the struggle is to understand how to help young people learn to stand on their own two feet financially BEFORE they get an inheritance.  Good habits, like bad habits, are hard to break.  When people learn to live within their means, make tough choices, delay gratification and practice discipline, they typically don’t blow through an inheritance. 

For those who’ve accumulated wealth that will outlive them, the question is always – do I give it to them now or later?  You know you can’t take it with you and your heirs will likely inherit it, unless you give it to a charitable organization.  Some people want to see their heirs enjoying the things that they worked hard to provide for them – so they don’t want to give it later.  The payoff for them is seeing the joy in their heir’s faces. 

I get that.  But I also believe it’s important to balance what your heirs need with what gives you satisfaction.  Sometimes the best thing you can do for a loved one is to insist that they demonstrate several years of complete financial independence before you offer to help them. 

 

MY FATHER’S STORY – PART 2

When he was older, my father would call me up and ask me how to invest $500.  I asked him why he wasn’t spending it?  He didn’t really need to be an investor at that point in his life, but he insisted.  I would have preferred that he take the $500 and buy himself something he enjoyed.  But he didn’t want to do this.

Until he passed away, my father was frugal.  His idea of a good meal was an all-you-can-eat buffet for $9.99.  I suppose he learned to be tight with money during all those years when I was growing up.  He just couldn’t bring himself to spend money on things he didn’t absolutely need. 

Instead, he continued to invest until he passed away.  This allowed him to leave an inheritance to his children.  He wanted to pass on his wealth and values to his children.  He also had no debt because he didn’t want to leave this world owing anyone money, or worse yet, leaving that legacy to his children.  I respect that so much. 

If you or someone you care about is struggling with these issues, we should have a conversation. 

 

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