Curing ‘affluenza’ among kids of wealthy parents
Raising a child isn't easy. School, sports, social activities, sickness, they can all keep parents up at night. Affluent parents have an additional issue that may be cause for concern: "affluenza," or the notion that unusual family wealth will lead to a poverty of values and initiative among their children.
While wealth can afford families the opportunity to travel, take specialized lessons, and purchase top-notch computers and educational equipment, affluent parents worry that their children will lack the initiative to succeed on their own, place too much emphasis on material possessions, and spend beyond their means. Affluenza can be treated, even cured, by establishing specific family values, goals, and legacies that lead to financial knowledge and benefits all generations.
Affluent families have unique planning issues, and it's critical that parents decide what kind of legacy they wish to pass on to their children. Try to answer the following questions: "What is your family proud of? What would you like to be remembered for? What do you want your children to value?" Taking time to map out this legacy is a great starting point for parents.
One simple way parents can teach their children about the value of money is by helping them set up a checking and savings account; many banks offer flexible accounts designed for students.
Affluent parents expect their teenagers to work part time, and in turn, understand what it takes to make a living. Likewise, children who work and/or receive an allowance can learn how to develop, and balance a monthly budget. Learning to balance a checkbook and budget will prevent children from being naive about money, another chief concern of wealthy parents.
Simply practicing the basics of budgeting (adding up what they earn in income and what they spend in expenses) is a terrific financial lesson for kids, whether their parents are affluent or not.
Affluent parents also have extra considerations to balance in the inheritance equation. A simple will may result in too much money being handed over to children all at once. Parents have several options to get the right assets to the right people at the right time.
First, they can stipulate a particular age at which their inheritance can be passed on so that their children can be prepared to handle this new wealth responsibly. Another option is to establish a trust that controls the distribution of wealth at the provider's discretion. For instance, a trust can be structured to reward future generations for certain educational accomplishments, offer incentives for them to work based on yearly income, or provide funds for a new business venture.
Affluent families can also share their wealth with others by establishing a private or public foundation, in some cases with family members serving on the board. A Family Foundation can include a "junior board" in which children can participate. Both a trust and a foundation can minimize the negative impact of transferred wealth so that future generations aren't burdened with heavy taxes.
Furthermore, parents can demonstrate their concern and express commitment to their community by volunteering for a favorite cause, school activities, or other philanthropic events, thereby establishing a legacy for their children to model. Parents may want to make an effort to expose their children to people with different socio-economic backgrounds so they develop an awareness of and empathy for other cultures, issues, and interests. By demonstrating a commitment to the community and a healthy attitude towards money, parents can positively influence their children to do the same.
With careful planning and the instillation of values, parents can inoculate their children from "affluenza" and foster a healthy attitude towards money.
Erickson Braund is a Financial Consultant with Wells Fargo Investments in Traverse City. Call 946-8708, or email Erickson.firstname.lastname@example.org