At Apriem, my financial management company, I deal with many families who want to help their children successfully move into the next phase of their lives. This leads to a variation on the same question: “Well, how did you do it?”
There is an answer. But before I tell it, I start with a story.
A Tale of Two Families
Over the years, many people have fallen into the ultra-wealthy category, and my two favorite examples are the Carnegies and Vanderbilts.
Andrew Carnegie wanted to be more philanthropic with his money. He donated most of it to various charities and left his wife and children with money that would make them comfortable, not wealthy. The idea was not to create a Carnegie dynasty but to give back to the community and world, and he succeeded in that mission.
On the other hand, Cornelius Vanderbilt had about $95 million (about $2.8 billion today), and most of it went to his eldest son. The rest was split among his other children, and soon it was all gone. They bought lavish homes and lived luxuriously, and while descendants down the line would give to charities extensively, most of the original fortune was squandered.
Going In Eyes Open
My wife and I both want only the best for our children. While we do not have anything close to what famous members of the Gilded Age had, we do alright for ourselves, and we can afford to give back.
The concern was that if we gave the children too much, they could go the way of the Vanderbilts. However, if we did not give them enough, they might struggle needlessly when we could have helped. We wanted them to be able to succeed, but not only because of their inherited money. That is a difficult balance to strike.
Our decision was not made over the course of an afternoon. For our children to turn out all right, we needed them to learn about money early on and respect its power. They should understand how much time and effort goes into earning that money and what sacrifices are made. My wife and I needed to be the ones to shepherd them down the path, and if we taught them well, they would do fine.
Knowledge Is Power
Of course, it’s good to have a lot of money, but most people do not. Your decisions should also factor in what kind of money you need for retirement. If you do not know what is right for you, you will never know what your heirs need. We faced that same situation.
So What Did We Do?
In our case, my wife and I did what we intended. Our children grew up comfortable, not spoiled. They faced struggles but did not suffer, and along the way, we taught them about money and were very transparent about how things worked. We did not pamper them; we taught and encouraged them, which was key.
We’ve struck a balance with our children; they will have enough money to help them in their future endeavors but not so much that it would hinder them. This is what works for us, but financial planning is a complex topic with no one simple answer. What works best for you and your family may not work for your neighbors and vice versa.
No matter what you do with your family’s wealth, know that if you teach your children the right steps, they will intuit the right way to move forward even when you’re no longer there to guide them.