Over the course of the past 25 years, I've spoken to hundreds of high-net-worth individuals. They all come from different backgrounds, and have different experiences and different stories about how they became wealthy.
But there is a common thread that draws these individuals together: fear for their children. Simply put, the wealthy worry about whether their kids will be as successful as Mom and Dad. Whether the kids will have a healthy attitude toward money and spending it. Whether kids brought up in an environment of material abundance can have the drive, focus and will to succeed in life.
A recent survey by private banking giant U.S. Trust lays out these concerns. It polled 457 Americans with at least $3-million (U.S.) in investable assets (which excludes principal residences) between January and March. Only a third of parents “strongly agree” their children will be able to effectively handle the inheritance left to them, while just 36 per cent “strongly agree” their children will be able to work together to make decisions to manage the family wealth after Mom and Dad are gone.
More than half of those surveyed have not fully disclosed their wealth to their children, and another 15 per cent have disclosed nothing at all because of concerns about how it might affect their children's lives, or fears that the children may squander the family wealth. In addition, half the respondents have never discussed with their wealth advisers ways of teaching children to handle wealth responsibly.
So, how do you allay these fears, and develop positive values in kids?
Call me cynical, but I think kids – particularly teenagers and “tweens” – learn more by doing something than they do by listening to a lecture from Mom and Dad (this has certainly been the case with my kids).
To that end, why not consider a philanthropic vacation, a trip where the family helps others by volunteering for an important cause.
I know a handful of wealthy families who have taken such trips, and they tell me it can be an excellent way to teach kids about the responsibilities that come with great wealth. It gives privileged kids a sense of accomplishment and purpose – something that can be difficult when you grow up in the shadow of highly successful parents.
Perhaps most importantly, it serves as a wakeup call: The kids understand that they come from a position of material abundance and should never take their wealth for granted because most people don't have the same financial or educational advantages.
There are a number of websites and other resources that can help you plan such a trip. Do a little digging and you'll find a wide variety of causes that need volunteers, everything from building a school in Ethiopia to restoring coral reefs in Antigua to coaching a soccer team for impoverished kids in Peru. Such volunteer vacations can be surprisingly affordable. Most of the time, charitable organizations provide basic food and accommodation, and some even offer special deals on airfare.
One intriguing idea is to couple such a trip with a more traditional vacation – a week volunteering, a week relaxing. The R&R on the beach can serve as a reward for a job well done, and an excellent opportunity to debrief on what the family accomplished for others and why it was important.
Over the course of a lifetime, I believe such experiences will pay recurring dividends. So much so that our family has decided to do it: We'll be helping Homes of Hope build a house for a needy family in Mexico. I encourage families of all levels of wealth to do the same.
Mr. Stenner is director, wealth management, and founder of Stenner Investment Partners of Richardson GMP. He is managing director for TIGER 21 Canada and author of True Wealth.
Email: thane.stenner@richardsonGMP.com
