October 24, 2013 at 04:47pm
“I want to leave my kids with enough money for college and also to buy a house in Palo Alto. But that’s it. I’m giving away the rest.”
“I’m going to pay for my kids to go to college and grad school, and also for my grandkids to do the same.”
“I’m working hard now so that my kids won’t have to. I wouldn’t want my kids to struggle like I had to. I’m leaving them all of my money.”
–These are just three different answers from my friends on the question of how much money do you plan to leave to your kids?
This question is faced by the entrepreneurs who have recently joined the ranks of the wealthy. And it is one faced by families with a history of inherited wealth.
How do you make sure that kids grow up to be responsible, compassionate, hard-working people and yet at the same time make sure that they have a safety net to fall back on?
“Ask how you would best provide a security blanket rather than a blank check. Most often, taking the struggle out of your children’s life takes away valuable life lessons, the pride of succeeding, and the humility of failing,” says Robert Watts.
Here’s some tips on how to raise kids who will be responsible with the money you leave them from Charles W. Collier’s excellent book Wealth in Families 2 ed. (Harvard University, 2008) –
- Set a good example: Provide consistent messages to your children about money; be steady in your behavior, like your spending habits. Your children learn by observing how you handle your wealth. Are you splurging on luxuries? Are you actively seeking tax shelters?
- Provide steady guidance: Slowly build your children’s comfort with money, starting with an allowance. As they grow older, increase their responsibilities. Teach them about saving by having each child manage his or her own small bank account. Let them make mistakes early on so that they can learn the consequences.
- Talk about responsibility to the greater good: Talk about social problems like the environment and poverty at dinner time. Encourage them to think about and talk about how they can make a difference.
- Put words into actions: Show your kids how money can improve their community. You and your children can participate in kid-friendly activities that support children’s causes. For instance, your kids can fundraise to help build a school in Kenya with Kids Can Free Kids. Or set-up a lemonade stand to raise money for pediatric cancer research with Alex’s Lemonade Stand. Or help a low-income college student with pay their tuition with Peninsula College Fund.
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