How Wealthy Families Can Avoid Raising an Entitled Child

Children of successful families often grow up with such a different experience from their parents. If you don’t believe it, check out “Rich Kids of Instagram,” every successful parent’s nightmare.

For many families, differing attitudes about money can create friction and divide. Given the discord, it is not surprising that, according to US Trust, over half of high net worth parents do not feel confident that their children could handle an inheritance (2012). And over three quarters of ultra-wealthy families are concerned about raising financially responsible children (Spectrem, n.d.).

So much time and energy goes into preparing and protecting assets for eventual transfer to the family—but are the families prepared for these transfers intellectually, emotionally, and financially? How can we help our children to see money in a purposeful way, where values supersede valuables? And how do you go about raising financially responsible children who aren’t entitled brats?

The bad news: there’s no magic formula. The good news: teaching and modeling gratitude is a great first step. Even better, giving is a powerful way to express gratitude, and fortunately there are many ways to do this together.

Engagement in philanthropy can be transformative; it can enable a family’s core values to flourish and create moments that directly demonstrate the tangible results that kindness can bring. Done right, this can inspire children and elevate their social consciousness for the good of society at large. And children who are thinking of those less fortunate—and feeling grateful for what they have—are a lot less likely to have feelings of entitlement.

The holiday season presents families with the opportunity to model gratitude and teach children financial responsibility in a way that is soulful, fun, and comes from the heart.

Planting the Giving Tree Seeds

Money habits—and giving habits—begin at home. A great way to approach the conversation is to start by asking questions that enforce the purpose of giving and maybe even serve as a source of inspiration. For example:

• “If you could give away a million dollars to a good cause, who would you give it to? Why?”
• “What do you want to be when you grow up and how will this help other people?”
• Share stories about friends, families, and others who have made meaningful contributions to society.
• Find out what causes they are interested in, or suggest some they may like.

Allowing children to identify a charity they like is a great way to get their buy-in. Encourage them to donate using their own dollars, perhaps from what they have saved from their allowance or work. Some families establish a habit of dividing allowances into categories like spend, save, and share, and offer “bonus” incentives like matching dollars for charitable contributions to encourage giving.

Make it Fun!

Never underestimate the mind of a child.

Getting involved with the charity itself, whether it be a civic organization, church, or school group, is a great way to make the cause come alive. Kids who volunteer build character and self-esteem. Moreover, it develops a sense of maturity and enables them to put their own problems into perspective.

Volunteering can be combined with family vacations (and in some cases, may even qualify for a tax deduction!). Traveling can be fun and purposeful at the same time if used as an opportunity to give the child a vision into life in other socioeconomic circumstances.

I’ve seen first-hand the impact that volunteer activity has on children of successful families. At a recent meeting for the Women’s Giving Circle, our junior members evaluated where their grant dollars would make the most impact. It was extraordinary to see these young women, many only 12 years old, sitting around the table discussing how their gifts could change the community. Here they were, changing lives while at the same time, being changed themselves.

The more you can relate the charity to the world surrounding, the more meaning it will have for your child. So don’t limit your charitable contributions to just money - give them life experience and relevance.

Establish a Family Foundation and Give Together

There is no better way to teach financial responsibility than by example. For families who want to make charitable giving a part of their lasting financial DNA, there are several options.

Very wealthy families may look to establish family foundations to make grants to charitable causes for years to come. Family members are involved as trustees and help manage the foundation. While this requires great financial and administrative commitment, family foundations are a tangible way to express your family’s values. They can create a bond to connect families across generations.

In her book The Giving Family, Susan Crites Price offers “The Dinner Table Foundation” as a simplified and financially flexible way to engage family members in giving. First, determine how much money will be given away, and how decisions will be made. Then hold a family meeting, and put all of the solicitations you’ve received on the table, large and small. The children have a say in which organizations will receive the donations, and can even propose ideas. To keep in meaningful, hold meetings 3 or 4 times a year. Some families even will even work together to raise money to make grants, which can help children become even more connected to the cause—and their families. The holidays are the perfect time to launch into this!

Another alternative is to establish a Donor-advised fund, or DAF. Your family can work together to choose the organization(s) to receive grant distributions each year. While the family foundation often requires a substantial investment (the median foundation is around $500k), and the “Dinner Table” alternative requires very little, a DAF typically requires a minimum gift of $10k. These gifts are permanent and irrevocable, and do offer tax advantages. Clients who establish DAFs can name their children as successors to continue their legacy of gift making.

Model gratitude through giving, and you’ll be on your way towards avoiding the entitlement trap.

What are you going to do this holiday season to inspire your family with a legacy of giving? To find out which option is best for your family, let’s be in touch.

Sources

Price, S.P. The Giving Family: Raising Our Children to Help Others. Arlington, VA: Council on Foundations, Incorporated.

Spectrem Group. (n.d.) Posterity is Key for Ultra-Wealthy. Retrieved on November 13, 2017 from http://spectrem.com/Content/Posterity-Key-Ultra-Wealthy.aspx

US Trust. (2012). 2012 US Trust Insights on Wealth & Worth. Bank of America Corporation. Retrieved on November 2nd, 2017 from http://www.ustrust.com/Publish/Content/application/pdf/GWMOL/2012-UST-Insights-Wealth-and-Worth-Highlights-Brochure.pdf

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of KAREN COYNE, CFP^® and not necessarily those of RJFS or Raymond James.

Raymond James is not affiliated with and does not endorse the opinions of other entities named. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Financial Advisors of Raymond James Financial Services, Inc. do not render advice on tax and legal matters. You should discuss any tax or legal matters with the appropriate professional.