With summer in full swing, my husband and I recently took our family to the Great Sand Dunes national park to enjoy the fresh air and a beautiful natural wonder. Before heading out, I grabbed Complete Family Wealth – Wealth as Well-Being to read during the long car ride. I expected it to be like many personal finance books I have on my bookshelves – a bit dry, but with some good tidbits scattered here and there that I could mentally file away. Instead, I found myself reading sections of the book out loud to my spouse, pausing when an idea prompted us into deeper conversation. Suffice it to say, I highly recommend the book (you can find it here or shoot our office an email, and we'll send you a copy).
The book's premise is simple: the origin of the word "wealth" comes from a word that translates to "well-being", and in the context of family wealth, financial wealth is just one aspect of many types of wealth that allow our families to flourish. One part of this discussion that I found particularly meaningful was how best to pass down assets in a way that helps the next generation genuinely thrive. So often, we encounter stories of gifts of wealth leading to entitlement, enabling destructive behavior, or worse. It's so common that many families wrestle with how much to pass on to children if they should pass anything on at all. Instead, authors James E. Hughes Jr., Susan E. Massenzio, and Keith Whitaker suggest an alternative that I couldn't agree with more – encouraging your kids to build lives that are truly theirs that can be complemented, not dominated by an inheritance or financial gift. To better navigate the delicate balance of making a gift of wealth a blessing and not a curse, here are 5 tips for helping your kids become their own people.
Let them try new things (and let them fail sometimes)
All of my children learned to crawl and then walk in tri-level homes. One of our early parenting decisions was to teach our children how to get up and down the stairs as soon as they were interested in them instead of gating them off (we did gate them off when they were very young – don't worry). I spent several days with each of my kids, dragging them down the stairs on their bellies to show them the safe way to do it. But after that, I let them learn by falling down a few steps. They'd cry for a bit, immediately turn around, and climb back up. But by allowing them to stumble a couple of times, they quickly understood the importance of sliding down on their bellies.
I think this lesson applies to many stages of life. Our children (and ourselves) learn by doing, and doing involves mistakes. I can think of so many things I know how to do now because my parents found the courage to let me have a go at them – skiing, driving a car, traveling. It's undoubtedly scary, and we all have to make the call on when the right time is for different milestones, but giving our kids the opportunities to try new things and potentially fail at them is how we help them mature into adults who can handle more complex opportunities – such as large financial gifts.
Let them choose
One of the hardest parts about being a parent is giving your kids the space to make their own decisions, even when you know they may not be the right decisions. I have a friend who doesn't yet have children but proclaims that when he does, he will let them eat all of their candy on their first Halloween so they learn the consequences of overdoing it on sweets. (I suspect this will be a group learning experience, where my friend also realizes that as a parent, you get to clean up the bodily consequences of such an experiment, but I digress). One of the most critical ways we encourage our children to chart their own path is by letting them make their own decisions - starting out small but increasing over time. In our current stage of life, one of the freedoms we've given our children is the chance to choose their own clothes every morning. The outcome is that they look like little circus members, and the day will come when they get made fun of for their choices, and they will hopefully learn from that day. Nevertheless, by giving them that autonomy, they gain a taste of agency that will be invaluable as they face more important decisions about what kind of company to keep and what values to pursue.
Tell your stories
Some lessons we learn from trial and error, but others we learn by having them gifted to us from someone else's trial and error. You've likely built your wealth from many instances of trial and error, and there were important lessons you learned along the way. Share those lessons. Tell your kids the stories of the times you succeeded but also of the times you failed. As you go, your children will also pick up on the underlying values you've sought to embrace and may, with time, explore ways to incorporate the values they've been raised with into a new set of values that are all their own. These values will be vital to guiding them when the time comes for them to receive any financial gifts you've set aside for them.
Talk early and often
It's no secret that money is a difficult conversation topic. We have a hard enough time talking about it with our peers, much less our kids. But part of that is self-fulfilling. If we don't learn to talk about it and view it from a healthy perspective while our kids are developing, they will struggle to talk about it and engage with it as adults. Kids are also incredibly observant, and without engaging with them and helping them think critically about money, they will form their own opinions of it and fill in their own narratives. Again, we suggest starting small. It makes me sound like a curmudgeon, but I am personally very anti-lemonade stand. I want my kids to understand that money comes from creating something of value for others and then putting in the work. I also want them to understand the weight of that money and that we want to operate from a place of gratitude for what we have.
I recently wrote an article on establishing family values, and one of our family values is that Boundys are generous because we believe we have enough. We say it out loud when we're still determining if we want to share. We remind ourselves that our bellies are full and our bodies are warm, so we can spare a little bit of what we have because we are grateful to have enough. This ongoing practice of recognizing the value of what we have, how we got it, and how we want to view it is something my husband and I are working to instill in our children in the hopes that it will benefit them as they encounter money in greater magnitudes later in life.
Trust them
One of the hardest truths we encounter regarding estate planning and gifting is that it's incredibly difficult to control our heirs. Even though it can be tempting to build out a will or trust that tries to hone in on the exact behavior you want them to engage in, to protect them from themselves, and to attempt to guide their hand, you can't. And when you try, what ultimately happens is that you turn a gift into a burden. Instead of offering your children the opportunity to complement the lives they've already built for themselves with a generous gift, you burden them with the weight of rules and expectations.
When I was a teenager, and I would ask for permission to go do something, my mother would give me permission with a reminder that she trusted me. Trust itself is also a gift. It tells us that the person trusting us believes in us - believes that we have the capacity to responsibly guide ourselves and do the right thing. It is undoubtedly a leap of uncertain faith – the very opposite of control, but it's key to making a gift of wealth a true blessing.
At Sherwood Financial Partners, we believe that with proper planning and foresight, families can build a thriving, living legacy that has an enduring impact both now and after they're gone. If you'd like to learn more about building your living legacy, we invite you to contact us for a complimentary consultation.
Hughes, J. E., Whitaker, K., & Massenzio, S. E. (2022). Complete family wealth: Wealth as well-being. Bloomberg Press.