Many readers know Brooke and I are expecting. The idea of a little one’s arrival is thrilling, joyous, and still a little difficult to process. Of course, we want the best for our child in all the ways one might expect. We continually ask each other, how can we create an environment where children can grow into kind, resilient, empowered people? So often I hear people say they simply want their children to be happy. While I too wish happiness on my children, I have always felt that happiness is a byproduct of other things. It makes more sense to me to focus on creating an environment that fosters the skills a child needs to chase after things that fulfill them, be aware of their own thoughts and emotions, and feel worthwhile and loved. Rather than trying to give them happiness, my approach is a little more roundabout.
Wishing the best for children holds true in the financial world; we want our children to have a relationship with money that allows them to be successful and empowered, wherever life takes them. That means being deliberate with our messages and actions around them.
Imagine walking into the store. Your daughter points at something she wants and asks if she can have it. Your initial response is “No, not today. That is too expensive.” Then you realize that you have plenty of money--realistically, it will not make a bit of difference if you buy what she wants. You still do not want her to buy it, but what will be the new reason?
Financially successful families may not start off financially successful, but the old mindset of not having enough often sticks around long after they become completely capable of buying the things they want. And is that message of scarcity what you want to deliver to your children? Or is there a better way to shape their relationship with money?
Then there are the children who grow up having everything they want. Their family takes care of them and money is not a limiting factor, thanks to parents or grandparents who worked incredibly hard to achieve financial independence. There is more at stake here than the classic concern of spoiling the kids. Children given everything they want can grow into adults who lack a solid sense of self-reliance--the feeling that they are capable and confident enough to “make it on their own.” We see this when adult children continually return to live with mom and dad or struggle to stay employed.
How can we walk this line? What do we see successful families do as they raise capable, down to earth, happy children into adults? There are some common trends as we listen to what the most successful kids and parents in this department have to say:
Kids had opportunities growing up to experience earning their own way. They may have worked a first job to pay for their car insurance or that summer camp, even if their parents could easily have paid for it. They may have applied and interviewed for scholarships in high school or held a work study in college. Looking back as adults, they take pride in the experience and believe it positively affected them, even if they may not have felt that way in the moment.
Kids learned from watching their parents interact with money. This is not surprising, but children absorb the habits and values of their parents like sponges. Even as adults, they recount how their parents saved money, or did not, and how it has shaped their own habits and thoughts around money. The parents who made consistent, conscious efforts to role model healthy ways to interact with money (or anything else, for that matter) found that it made a difference. Many of these parents also placed importance on financial literacy with their children. They taught basic financial ideas like saving, investing, and balancing the future with the present. Many gave their children opportunities to budget, pay for things, and use a debit or credit card responsibly. Some even opened up a Roth IRA and had their newly working teenagers save a little to practice delaying gratification and saving for the future.
Children and parents who make a conscious effort to maintain good relationships with each other were much better off. Not only were children more receptive to financial advice from their parents, but it also led to easier money conversations later in life. Estate planning for financially successful families has its own set of unique challenges, and the process is far easier when family members have deep, positive relationships with one another.
Parents were very deliberate about how they shared wealth with their children. With gifting or leaving money, people usually have kind intentions for those on the receiving end. The most successful wealth transfers we have seen were structured to reduce the chance of a negative outcome. Especially with large amounts of money, these clients were thoughtful in how money and assets were split amongst children, as well as how the children would receive and access the money. These parents were aware that an overabundance of resources can demotivate their children, and leaving assets can cause family discord. By putting their heads together with us, they were able to juggle the financial pieces (pay less in taxes and transfer wealth efficiently, preserve and grow wealth, etc.) while still choosing routes that would not negatively affect the child’s quality of life. As many of us know, large amounts of money falling into people’s laps can cause all kinds of headaches and complexities alongside the positives.
We have discussions with clients about their children and loved ones all the time. Some of the greatest goals and expenses we have center around our children and those we care about. Whether it be helping with college, a wedding, a first home, a loan from the bank of mom and dad, or even an inheritance, how we give and support our children shapes their relationship with you, money, and their own sense of self.