How To Grow Kids In Midst Of Wealth
Acquisition of wealth can be by one’s own efforts, or without much efforts. Inheritance, on the other hand, is usually without much effort on one’s part, and inheritors may also grow up in wealth.
I was asked this question by a friend at a social event. I saw that the tone was quite serious and not exactly cocktail chatter. “You are family business consultant and a professor of family business. What do you think?” he asked.
Now, I do have a background of coming from a business family, and am a professor of family business in a top 5 B-School, am doing my PhD. in the subject of family business, have advised numerous families, and have, over the last five years faced numerous kids (about 1500 and counting) from wealthy family businesses.
I also teach parents in my Owners’ Management Program and Women’s Management Program, where I cover these issues. So why did I feel uncomfortable?
The short answer was, that this was not an easy answer to give. Like all issues related to family businesses, the answers overlap emotional and logical areas, and one always avoids taking unpleasant steps, even if one knows, it is the right thing to do.
I did give him an answer, but the person was not in a proper state of mind to discuss this issue, and he soon moved on to a more interesting person! This question did arise a lot of interest, and I do realise that parents are faced with this challenge, and hence seek to address this topic here.
Firstly, a background into the origins of wealth to understand better. Wealth in families can be acquired or inherited.
Acquisition of wealth can be by one’s own efforts, (e.g. establishing a business, becoming a famous professional, etc.) or without much efforts, (e.g. winning a lottery, litigation etc.). Inheritance, on the other hand, is usually without much effort on one’s part, and inheritors may also grow up in wealth.
Acquirers have worked to get their wealth, which causes them to move into a higher social strata and also have a change in their lives. They may not have to worry about finances as they may have faced earlier, but the new lifestyle may take some adjusting to get to. Which some may or may not be able to adjust to.
They may also yearn for the good old days, where the life was much simpler. Sudden wealth may also strain relationships with the other family members, especially those who are deprived of the benefits, and who may be jealous of the good fortune of their sibling. Their expectations for support and share of the wealth would also increase, in order to make things more “fair”.
On the other hand, the inheritors who are grown in wealth, will come to expect their wealth as a given. The parents, busy leading their own lives, may delegate childcare to the domestic help. The children grow up with non-family caregivers, who may pass on their own value systems to these kids.
The children will believe that wealth is usually the answer for all their problems, especially when, they see situations where the parents use wealth to solve any problems that the children may face. They will become dependent on wealth to support their existence.
They may also have feelings of guilt and incompetence, as they know, that they had not worked for the wealth, and hence will have one of three possibilities, not be able to deal with it, or run away from it, or just squander it.
When the children have their every wish granted immediately, they do not experience the pangs of want or understand the value of things. The happiness in finally getting something which is desired for a long time, is a pleasure that they may not experience.
They do not understand the pleasure of working for something, by saving up for it or getting it after having to sacrifice or work for it. This explains why rich kids get bored very easily and usually say they have nothing to look forward to. They are often looking for avenues for fresh excitement, which could lead to them trying more risky, or even dangerous things.
All this, supposedly to derive relief from the boredom of having done it all! This is often the reason why some of them hit headlines for often the wrong reasons. A jury in Texas, USA had acquitted Ethan Couch, after his car accident had killed four people in a drunk driving crash, when his lawyers argued that he was suffering from “influenza”.
The parents are also very eager to provide their children with all the benefits of wealth, and hence there are no limits set. The parents also may be under the peer pressure of ensuring that their kids get everything and not be deprived.
The wealth also turns out to be a way for the parents to reduce their guilt and they shower their children with wealth, which children realize, is available for the asking or with manipulation. This becomes even more prominent in conflicted or broken families, as parents use wealth as a means to reduce their guilt or win over their children’s love.
They are worried that putting limits would hurt or deprive their kids, who would be at a disadvantage against most other children. This fact becomes very painful for them to address. A fact that most kids quickly learn to exploit and use to their advantage.
The children become hooked onto wealth. They usually live in huge insecurity, as they realise that their identity is determined by their wealth. And for them, to even imagine a life without wealth is scary. Their self-confidence, esteem and purpose is around their wealth, and their biggest fear is, what would happen to them if the wealth would disappear.
The challenge is, that most children are ill equipped to handle this situation and most parents have no clue on how to handle this.
What can be done?
Firstly, the most important task is to involve children in chores and tasks around the home. In spite of having domestic help, it is important that children learn basic tasks like keeping their room clean, laying the table, or even learning to travel without the family chauffeur and car.
They should realise that always travelling first/business class is not a given, but a privilege and they should experience life besides this, in order to appreciate their position. In fact, most families make the children earn the right to enjoy these benefits.
Earning would mean, entailing certain deliverables from the children, to get these privileges. These could be in the form of pre-decided grades in school, or as an annual family holiday.
These rules may have to be explained to the children, before implementing. I know of a family where the nine-year old’s first response to the father informing that they were travelling by business class instead of first class, was “Have we become poor? Will I have to change my school and friends?” Secondly, they should be made to realise that there are others who are not privileged and this is not normal life led by all.
Limits should be set, based on the age and environment the children are brought up in. This will also help in not fulfilling every want. The kids should be asked to work or save up for items that are “wants” or “luxuries”, which they claim as “needs”.
Develop skills or work that they are good in. The kids need to have a purpose. Doing something that they have a passion for, gives them an avenue to achieve and feel good about their achievements. These should be limited by financial and time constraints. Parents should not fund businesses which are always losing money or are not able to raise external funds.
Or the aspiring painter whose works no one wants to buy, or the perpetual student who is always studying. Families should clarify that the kids are expected to earn after a certain period of time and the family funding may not be available after that time. They should understand that the wealth is there to support their endeavors but it is not something that they should become dependent on.
Let them work: It is very difficult to explain this, especially in wealthy families where the next gen may not have to work, but the next generation should be expected to work for pay. This will also give them a sense of achievement and appreciate the value of money. Else they would be in the impression, as I saw in one family, where the next generation thought that the money used to come from the ATM!
Let them learn to solve issues by themselves: Parents should not rush in to solve every problem that the kids face, and they should be allowed to solve issues by themselves. This would also build their self-confidence and ability to handle problems. Children will not like this, but this “tough love” may be essential to build character and problem solving abilities to face the challenges ahead.
Let them face relationships outside their social circle: Children from wealth are usually brought up in very restricted environments due to security concerns. They grow up with other children from similar backgrounds, going to the same schools, holidays, etc. This sanitizes them from what reality is, as wealth or their family name ensures that they face no hardships.
This also prevents them from understanding what the real world is, as they may not be in contact with others from different backgrounds. The children do not realise this, and they have difficulty in emotional relationships as they grow. They think that money can solve every problem and their wealth can help them out in relationships.
Additionally, due to their wealth, they may also attract people who may want to take advantage of their wealth, and hence they also become suspicious and do not trust easily. This could lead to a lot of emotional stress for such kids.
This is the reason, why some families seek to send their children to a foreign country, for education, to broaden their minds by exposing them to a totally new environment. This would work fine, if they were in an environment where their family name and wealth would not matter, and they would have to start making new friends across nationalities and cultures. This effort fails, when they find the same group of friends from back home, and carry on the same lifestyle activities that they had enjoyed earlier.
Getting a good education, the best money can buy and what the children want to pursue, is undoubtedly essential. But a good financial base of how to handle wealth is important.
There are other things which also can be done, but this is a good starting point to ensure that business families are able to guide their next generation children to grow more grounded in the midst of wealth.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.