Is your wealth killing your children’s ambition?
One of the world’s wealthiest investors, Warren Buffet, famously believes strongly that his kids should make their own way in the world, ‘I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing’*. South Africans who find themselves in a very healthy financial position are likely to be just as eager to instill healthy financial attitudes and ambition in their children to avoid them becoming spoilt.
Jamey Lipschitz, wealth manager at Sanlam Private Wealth says there is an old saying: ‘the first generation makes the money, the second enjoys it, and the third squanders it’. “When it comes to their children and their wealth, we often guide our clients to look beyond material assets and to consider what values they would like to instil in their children as a part of their legacy.”
Lipschitz offers the following tips to parents to help their offspring cultivate a healthy financial attitude:
- Stay involved in their lives. Take the time understand them, their dreams, their ambitions, their personalities and their attitudes to money. Giving them material possessions and beautiful clothes may be seen as one level of involvement, but making the time to get to know them will help ensure they can be guided in the most appropriate way.
- Instil appropriate financial values, with an emphasis on education and hard work. Unless wealth is inherited, you will be very well aware of what it took to make it. It is good practice to actively transfer sound values to your children. They should see themselves as the custodians of the family wealth, and that it is their responsibility to preserve and grow it for future generations.
- Limit their access to money. In a sense, it is a good idea to protect children from wealth. Having access to too much money at a young age will limit their ambitions and desire to live productive lives. Wealth provides life choices that young people may not be in a position to make. For example, an 18-year-old with access to lots of money may decide not to pursue a tertiary education or may be less inclined to enter the job market or follow a career.
- Have those talks about money. Money may be perceived as a ‘distasteful’ subject of discussion. While it is not necessary for children to know exactly how much the family is worth, they do need to learn how to manage money. It is a good idea to introduce them to the family’s financial advisers. Instilling philanthropic principles is also a way of avoiding the ‘spoilt’ trap. Talking to children about their responsibility to give back to society and getting them involved in the charities you support is an excellent life lesson – not only does it instil good values, but it will also benefit others.
- Set an example. What you do is often as important as what you say to your children. Entrepreneurs with money earned in this generation often feel the need to display their success, but expensive cars and houses may be sending the wrong message to your children. Whilst the family may enjoy the finer things in life, the children should learn that their self-worth is not tied up in money or possessions.
“There is no golden rule for ensuring your wealth does not ‘spoil’ your children’s future. Each family situation is different, and children will need different levels of guidance. But you cannot just give your children the best money can buy without also teaching the values which will form the basis for life-long habits to ensure not only their own financial security, but that of generations to come,” Lipschitz concludes.