How do you instill values in your children so that even the most privileged work for the benefit of their families and others?
From soaking up the sun on their families' private yachts to high-end shopping sprees, the popular Tumblr “Rich Kids of Instagram” has given the world a concentrated glimpse into the lives of the rich and not-so-famous. The site, which curates photos posted by the young and wealthy on social media, shows glamorous lives of reckless spending and wild partying.
Many wealthy families worry about the attitudes displayed by the "Rich Kids of Instagram": Its subjects' sense of self-worth seems to come from spending.
How do you instill a different set of values in your children, so that even the most privileged find an occupation, keep their family's values and shepherd the fortune for future generations and for the benefit of others? There are no guarantees, but here are a few places to start:
Set a good example
If parents do meaningful work and manage money wisely, their kids will notice. By setting a family expectation that all children will study hard, earn the best possible education, get good jobs and live well within their means, kids are more likely to gain confidence and a sense of self-worth from work — rather than spending.
Understand the denominator problem
Children need to understand, and more importantly appreciate, that unless they commit to sustaining and building the family's wealth, the inexorable increase in beneficiaries at each generation will quickly dissipate even the largest fortune.
Transfer wealth in the right way
Trying to protect wealth at all costs, whether by keeping the next generation in the dark about family wealth or creating trusts with elaborate control provisions, often backfires. Beneficiaries who sense that they aren't trusted are much more likely to display the very behavior the grantor fears most. Beneficiaries who understand the uses and purposes of family wealth, who see themselves as responsible stewards with an important role to play in preserving and growing wealth, are more likely to carry on the family's legacy.
Understand the value of philanthropy
Warren Buffett publicly announced he will give nearly all of his fortune to charity, not his children. Buffet's move illustrates an important and growing trend in family wealth transfer — the value of philanthropy. Buffett funded substantial gifts to foundations run by each of the children, thereby giving them a degree of power, independence and responsibility. In doing so, he gave a lasting confirmation of his respect for them, their charitable goals and their decision-making ability. Buffett and his first wife undertook major philanthropic efforts individually, jointly and in partnership with others (including the Gates Foundation), thereby setting a precedent and providing an important education for his children.
Amelia Renkert-Thomas is joint managing director of Withers Consulting Group.
