For wealthy parents, money is as much a concern as it is a pleasure, especially when it comes to ensuring the next generation won't lose their hard-won fortune.
In the old days when inheritors turned 21, parents might have sent them to the family's trust officer, who would inform them of their monthly income limits and send them on their way.
These days, wealth creators are more knowledgeable about how their money is managed and they want their children to be well-prepared for the challenges, as well as the pleasures, of possessing wealth.
"Money is a facilitator of a full and happy life and families need to make choices and understand what money can do to make productive, happy members of society," says Katherine Lintz, founder and CEO of Matter Family Office. "We believe that every family member, whatever their age, should have a working knowledge of how money works."
The old, trust officer model didn't succeed because there was no method for preparing the family for success or for keeping wealth through several generations," Lintz says. "If financial capital supports human capital, then we need to spend time empowering the wealth creator or the inheritors so they understand money isn't the end-all, but a tool to be used for their whole life."
Hands-on teaching methods
At Matter Family Office, so-called money camps are developed to teach children hands-on business and financial skills. The skills are geared to specific ages and designed to be practical. "It's not about asking 19-year-olds what hedge funds they want to invest in. That's not where they are. You have to figure out where they are and try to stay a step or two ahead," she says. "It could be something as simple as putting together a budget for the family to go bowling and have a pizza."
Another method for educating inheritors is one all families can practice on their own. Scheduling regular meetings to discuss money as a group is a good way to personalize finances. Lintz says storytelling is a valuable part of these meetings and one that escapes many parents. "Many children in successful families don't know their dad had student loans, or what it took to start the family business."
Children need to hear about their parents' bad financial choices along with the good ones. "Everyone makes bonehead decisions," Lintz says, and it's important for children to see that they can make mistakes and still achieve as much as their parents did. "If they only see the successes and not the failures, it can be intimidating," she adds. "Children want to hear about how dad had to borrow money for their parents' honeymoon or about how two of their startup companies failed before they became successful."
In the end, Lintz says ensuring the productive use of wealth within the family involves common sense and learning to be intentional about financial decisions.
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