Every parent wants to do right by their child, including teaching them to be fiscally responsible and self-sufficient. The alternative is a child who never really grows up, or learns how to support themselves. And if you have assets you want to pass on, that can translate to the “trust-fund baby syndrome.”
So how do you raise your child to be a responsible steward of their money, and most importantly, prosperous in their own right? How do you ensure that the money you’ve worked for and accumulated will be managed well, should you pass on an inheritance?
The Pitfalls of Self-Made Families
There’s a phrase that circulates in wealthy circles—”Shirtsleeves to shirtsleeves in three generations.” It describes the way a family can build an empire of wealth, only for it to be squandered by the third generation because of poor management. The first generation turns humble beginnings (shirtsleeves) into wealth through an idea and some hard work. The second generation works to maintain the empire they’ve inherited (think of a suit-wearing CEO). The next generation spends what is left.
Every parent wants their kids to have a better life than they did. However, without the right education to steward the wealth you create, that wealth can disappear. If, instead, you can impart your knowledge and skills, along with your wealth, you can ensure that not only will your children have a better life—so will your grandchildren, great grandchildren, and far beyond!
5 Concepts to Nip Entitlement in the Bud
1. Teach Financial Responsibility Early
Of course, all parents impart certain values to their children. Yet too many view money as taboo, or as something not to be shared with children. However, teaching this kind of responsibility early on can help children develop a healthy money mindset.
Chores present an excellent opportunity to teach responsibility to your children from an early age. It’s not about punishment, it’s about taking proper care of the things that you have. Picking up toys, clearing dinner plates, and other chores helps your child to value what they have, and treat tools and possessions with care. Sports, scouts, after-school jobs, or volunteer work can also teach general responsibility.
Financial responsibility comes into play when you teach them to save. Offering a small allowance for chores can teach your children the value of earning money and saving it. If there’s something they want, remind them that their allowance (or paycheck from a job) can help them get there if they have the discipline to save. This allows them to prioritize what is important to them.
2. Don’t Do Too Much
Sometimes, being a yes-man can prevent our children from learning valuable skills about money. Parents want to help their children, yet doing too much can create entitlement, and cause them to expect that you’ll always finance their desires (or mistakes).
To create good habits, teaching your children how to support their interests is an important lesson. In the example above, we talked about financial responsibility, and this step will help your children put that responsibility in practice!
Do they want to buy something? Help keep them on track with their savings goals, or find a way to earn a little extra money.
Does a teen or young adult child want to earn more money? Support their journey by being a sounding board for their ideas, and offering encouragement.
Are they an entrepreneur in the making? Make sure they understand they’re in for a serious learning curve and cheer them on as they learn what it takes to develop an idea.
Interested in college? Work with them to see how they can contribute, whether through scholarships, grants, a part-time job, or even just making the grades. They don’t have to pay their way, yet having some level of involvement can help them value their education that much more.
Sometimes, the best way you can help your children is to teach them how to do something on their own (rather than just doing it for them). Choose carefully what you do, or don’t do, so that they can become increasingly more independent and confident. In the process, they’ll pick up some great habits. And if you do choose to buy or do something above and beyond for them, it’s because they’ve earned it.
3. Recognize True Wealth
When we talk about wealth, we don’t simply mean financial wealth. The Prosperity Economics™ Movement takes an expanded approach to wealth. And the greatest wealth your family has is your human capital.
The people that comprise your family are unique, and each person has unique talents and interests. It’s wise to invest in nurturing these skills and interests, so that you can all become better people each day. This means that rather than investing (only) in consumerism, you’re also investing in the potential of your family members. Education, mentorship, and networking are valuable investments.
When raising your children, nurturing their interests and talents will help them to bloom. Not only will they feel valued, they will become more confident in their own abilities and knowledge.
To circle back to point number one, make sure that you talk about money. Money should not be taboo. That’s because when we fail to talk about money, and the responsibility that comes with it, we fail to impart our financial wisdom and lessons.
If your family’s wealth begins with you, you’ve likely had successes and triumphs, and genuine experience navigating tough situations. By staying tight-lipped, you lose out on teachable moments that could benefit your children. Do you think this makes the next generation more prepared, or less prepared?
When you have assets, this is even more crucial. Do your beneficiaries know that you’re leaving an inheritance to them? And have you prepared them with the skills and knowledge to manage that inheritance once they receive it?
According to a study by the Williams Group, the primary reason families lost their wealth was a loss of trust and communication in the family—sibling rivalries, resentment, and the inability to speak candidly about important things.
Rather than waiting for things to go south to discuss money, be as open about your finances as possible at every stage.
5. Remember that Inheritance is More Than Money
Remember how wealth is more than just money? That also means that your inheritance should be more than simply money. What memories, connections, and experiences do you want to leave to your loved ones?
Make it a practice in your family to share wisdom, values, knowledge, and mentorship. Share your stories, your recipes, your heritage, and your traditions with your family. While an inheritance is likely going to include physical wealth, that wealth is the result of your family’s human capital—your family’s true source of wealth.
Connection is Key to Raise Prosperous Children
The lesson is that open communication, fostering your children’s strengths, and teaching good money habits will help them have a more positive money mindset. Your children will benefit from the wisdom you impart, and helping them to do will be far more beneficial than doing everything for them. Most importantly, to raise Prosperous children, you must raise them with a Prosperity Mindset.
Looking for help with your finances? Reach out to a Prosperity Economics™ Advisor today. We’ll connect you with a member of our network, so you can build a legacy that lasts!