It’s a natural impulse. You want what’s best for your kids, and you have the means to ensure they want for nothing. But shielding your children from financial realities—spoiling them, in other words—can have unintended consequences. “You’re neglecting the preparation for adulthood every child needs,” says Thayer Willis, a licensed clinical social worker who counsels affluent families and their advisors on the impact of wealth. The right kind of financial grounding, on the other hand, can help kids develop financial literacy, and along with it, a meaningful life, Willis says.
The author of Navigating the Dark Side of Wealth: A Life Guide for Inheritors, Willis knows first-hand the challenges family wealth can present. An heir to the multi-billion-dollar Georgia Pacific Corp. fortune, she helped pioneer a career niche counseling the wealthy about the meaning of their lives—and their money.
“What no one can inherit is a meaningful life,” Willis says. “We must all create that for ourselves. Our wealth is a great resource for creating meaning, but wealth itself does not deliver meaning or purpose. The greatest gift you can give your children is to facilitate the discipline, focus, and initiative to help them make their own way.”
Here are suggestions from Willis for giving your children the financial building blocks they need:
Give an allowance. As soon as children express an interest in money, typically at age five or six, provide an allowance with guidelines for what proportion of the money to spend, how much to save, and how much to give to a charitable cause.
Show them how to keep a ledger. At about age eight, have your kids start tracking every dollar that comes in—from their allowance, investment earnings, or gifts—and goes out. This will help children understand the value of money, and it will be useful later when the child has a bank account or credit card and needs to establish a budget.
Help them become savvy consumers. Rather than letting your kids shop with an unlimited budget, coach them to become informed and choosy. Willis, for example, recently gave her 15-year-old daughter three gift certificates, of the same amount—one to a high-end boutique, a second to a department store, and a third for a discount outlet. “I’m going to take her myself,” Willis says. “It’s a great lesson. Retailers market so heavily to teens, and I want her to think about whether she wants a trendy brand or something that’s exactly the same but less expensive.” Willis also suggests talking about products’ short- and long-term appeal.
Encourage kids to get a paying job. Earning a paycheck is a self-esteem builder and an important component in developing financial competence. “One of the greatest plagues of kids that grow up in wealthy families is never becoming good at anything,” says Willis. “Unfortunately, that’s quite common. But earning money is a step forward in helping kids become competent—a priceless treasure.”
Model your values. “The most important values in life are caught, not taught,” Willis says. So make sure you and your spouse are on the same page, and be creative in using your wealth to set the kinds of examples you’d like your children to follow. That could mean a family philanthropy project, cash rewards for accomplishments, or achievement-oriented travel.
Encourage community service. Hands-on volunteer work can help your kids gain perspective on what’s truly important in life. From an early age, children can learn to make decisions about giving money, saving it, and spending it. A priority on community service will deepen the message.
Guard against a sense of entitlement. Children who lean on their family wealth often fail to become people of significance in their own right. Working recently with five generations of a wealthy family, Willis had the third- and fourth-generation inheritors answer the question: “We are the first generation of what?” As Willis notes, “Your whole reality doesn’t have to be based on those who created the wealth. This question is about what you have accomplished.”
Answer your children’s questions. If they ask, “Are we rich?” give a truthful answer, but phrase it carefully. When her 11-year-old son asked if he was going to get an inheritance, Willis replied, “You are going to get a great starter kit, a great education, and maybe money to start a business or get into a house. But you are not going to get so much that you can do nothing.” She also used the question as an opportunity to teach gratitude. “We are so fortunate in that we have enough money to pay for what we do,” she told her son. “Many families don’t have that.”
Not spoiling your kids is a lifelong process. But these suggestions can be a good beginning, Willis says. “Most young people do not grow up with this kind of guidance, and learning these lessons will set your young adult offspring apart from their wealthy peers,” says Willis. “Your best gift is to allow them to develop competence and the opportunity to make a life for themselves.”