"How should one bring up kids in the midst of wealth?" I was asked this question by a friend at a social event. This was not mere cocktail chatter—he really wanted an answer. "You are family business consultant and a professor of family business. What do you think?" he asked. Now, I do have a background of coming from a business family, and am a professor of family business in a top five B-School, am doing my PhD. in the subject of family business, have advised numerous families, and have, over the last five years faced numerous kids (about 1500 and counting) from wealthy family businesses. I also teach parents in my Owners' Management Program and Women's Management Program, where I cover these issues. So why did I feel uncomfortable?
I know of a family where the nine-year old child was aghast they'd be travelling business rather than first class: "Have we become poor? Will I have to change my school?"
The short answer was that this was not an easy answer to give. Like all issues related to family businesses, the answers overlap emotional and logical areas, and one always avoids taking unpleasant steps, even if one knows it is the right thing to do. I did give him an answer, but it was my no means comprehensive. Here, I will try and give an in-depth insight.
Acquirers vs. inheritors
Firstly, let us look into the origins of wealth to understand this issue better. Wealth in families can be acquired or inherited.
Acquisition of wealth can be by one's own efforts, (eg. establishing a business, becoming a top-ranking professional, etc.) or without much effort (eg. winning a lottery, litigation etc.). Inheritance is usually without much effort on one's part, and inheritors may also grow up in wealth.
Acquirers have worked to get their wealth, which causes them to move into a higher social stratum and also have a change in their lives. They may not have to worry about finances, but the new lifestyle may take some adjusting to. They may also yearn for the good old days, where life was much simpler. Sudden wealth may also strain relationships with other family members, especially those who are deprived of the benefits and may be jealous. Their expectations for support and share of the wealth would also increase in order to make things more "fair".
On the other hand, the inheritors who are have been brought up in wealth, will see their good fortune as a given. The parents, busy leading their own lives, may delegate childcare to domestic help and use money as a tool of demonstrating their affection. Over time, the children may come to believe that wealth is usually the answer for all their problems—especially when they see situations where the parents use money to solve any problems that the children may face. They will become dependent on wealth to support their existence. They may also later on have feelings of guilt and incompetence, as they know that this wealth was not earned by them. They may not be able to deal with it, or run away from it, or just squander it.
The challenges of being born into money
When children have their every wish granted immediately, they do not experience the pangs of want or understand the value of things. The happiness in finally getting something which is desired for a long time is a pleasure that they may not experience. They do not understand the pleasure of working for something by saving up for it or getting it after having to sacrifice or work for it. This explains why rich kids get bored very easily and usually say they have nothing to look forward to. They are often looking for avenues for excitement, which could lead to risk-taking, impulsive behaviour. All this supposedly to derive relief from the boredom of having done it all! This is often the reason why some of them hit headlines for often the wrong reasons. For example, a jury in Texas gave Ethan Couch—who killed four people in a drunk driving crash—a light sentence after his lawyers argued that he was suffering from "affluenza".
The children become hooked on to wealth, but they also feel insecure as their identity is largely determined by money that they had no part in earning.
Parenting has a lot to do with whether "affluenza" sets in or not. The parents may see no harm in giving their children every benefit of wealth and may fail to set limits. Money also becomes a way for the parents to alleviate their guilt at not spending enough time with their children. Before long, the kids realise that they can easily manipulate their parents to get more material goods or money.
The children, in the meantime, become hooked on to wealth, but they also feel insecure as their identity is largely determined by money that they had no part in earning. Their self-confidence, self-esteem and purpose are built around their wealth, and their biggest fear is losing their riches. What would they have left?
The challenge is that most children are ill-equipped to handle this situation and parents are not much more clued-in either.
What can be done?
Regardless of how much wealth you have, children need to be taught certain values and behaviours to be able to cope well with life.
Building the right value system of work and empathy
The first and most important task is to involve children in chores around the home, whether or not there is an army of domestic staff. They need to be tasked with keeping their room neat, laying the table and travelling by public transport. They should realise that always travelling first/business class is not a right, but a privilege. They must be taught to appreciate their "luck" and taught to experience life beyond the trappings of their fortune. They need to know that their default lifestyle is not "normal" for everyone.
They must also learn what it means to "earn" privileges—such as making good grades to be taken on a vacation abroad. They should be clearly told the difference between wants and luxuries that they claim are "needs". These rules may have to be explained to the children, before implementing. I know of a family where the nine-year old child was aghast they'd be travelling business rather than first class: "Have we become poor? Will I have to change my school?"
Develop their skills and abilities
Kids need to have a purpose. Doing something that they have a passion for gives them an avenue to achieve and feel good about their achievements. However, they need to be kept accountable, especially when they grow older and may want to start their own ventures.
Parents should not fund businesses which are always losing money or are not able to raise external funds. Or the aspiring painter whose works no one wants to buy...
Parents should not fund businesses which are always losing money or are not able to raise external funds. Or the aspiring painter whose works no one wants to buy, or the perpetual student who is always studying. Families should clarify that the kids are expected to earn after a certain period of time and that family funding may not be available after that time. They should understand that the wealth is there to support their endeavors but it is not something that they should become dependent on.
Get them to work
It is very difficult to explain this, especially in wealthy families where the next gen may not have to work for money. However, they should work for the sense of achievement and to appreciate the value of money. I interacted with one family where the next gen thought the money came automatically from an ATM!
Let them learn to solve issues by themselves
Parents should not rush in to solve every problem that the kids face—and especially not by throwing money to make the issue go away. Kids need to learn how to deal with their own problems if they are to grow up into self-confident and capable adults. Children will not like this, but "tough love" may be essential to build character and problem-solving abilities to face the challenges ahead.
Let them have relationships outside their social circle
Children from wealth are usually brought up in very restricted environments due to security concerns. They grow up with other children from similar backgrounds, going to the same schools, holidays, etc. They experience a sanitised version of reality and may have little insight into how most others live. The children do not realise this, and they have difficulty in emotional relationships as they grow. They think that money can solve every problem and their wealth can help them out in relationships. Additionally, due to their wealth, they may also attract people who may want to take advantage of their wealth, and hence they also become suspicious and untrusting. This could lead to a lot of emotional stress.
While it is great to give your kids a great education and a comfortable life, it is even more essential to not let them develop an attitude of entitlement.
This is the reason why some families seek to send their children to a foreign country for education—to broaden their minds by exposing them to a totally new environment. This would work fine if they were in an environment where their family name and wealth would not matter, and they would have to start making new friends across nationalities and cultures. This effort fails when they find the same group of friends from back home, and carry on the same lifestyle activities that they had enjoyed earlier.
While it is great to give your kids a great education and a comfortable life, it is even more essential to not let them develop an attitude of entitlement. They must be taught how to value and handle wealth.
There are other things which also can be done, but this is a good starting point to ensure that business families are able to guide their children to grow up grounded in the midst of a high-flying lifestyle.