Most business owners want to achieve financial success. If you have already achieved it, then congratulations! Feel free to invite me for a spin in your new Lamborghini Aventador. Like all good things in life, financial success is a double-edged sword, especially if you have kids. Wealthy entrepreneurs face a tremendous dilemma: how do you raise financially responsible children? Can you give them a taste of the good life that you worked so hard to achieve without spoiling them? It’s not easy. So what can you do?
Option one: Give them nothing
Wellington Burt, a lumber entrepreneur, died in 1919 as the eighth richest man in the country. He was not happy with how his children or grandchildren turned out. Upon his death, Burt indicated that his fortune was to be held in trust until 21 years after the death of his grandchildren. At that point his remaining heirs would be given access to the fortune. Ouch.
So not only did he not raise financially responsible children, he decided to spite them by denying them access to his fortune after his death. His last grandchild died in 1989 and 12 decedents recently split the approximately $100 million fortune. Obviously this is a terrible idea. He most likely ate Thanksgiving alone, his children resented him, and it doesn’t seem like there are any winners—except for the heirs who were born with a winning lottery ticket.
Option two: Indulge them
Being successful takes a great deal of hard work and sacrifice. I liken building a business to trench warfare at times. You have to work really hard to make a little progress each day. Once you make it, one of the perks is to protect your children from this harsh reality. As a nurturing parent, this seems like the right thing to do. But sadly, it’s just as bad as option one. Just take a look at all of the trust fund babies that roam the clubs of New York at night without any meaning, purpose or direction in life. Many had parents, grandparents or great-grandparents that built their fortunes from nothing.
Indulging your children can provide a false sense of entitlement, making them spoiled brats. It can also lead to great personal insecurity and a lack of self-confidence, as they don’t know if they are capable of achieving success in life without piggybacking on their parent’s success. They may grow up to be unhappy people. No amount of gilding can fix that.
Option three: Take a messy, complex, middle path
I have several very good friends that are the children of extremely successful entrepreneurs who are kind, responsible, generous and appreciative. I’ve analyzed them at length to try and understand why they are how they are instead of turning into trust fund babies.
The lessons I’ve learned are:
Teach your children at an early age about money
Take them to your business. Have them work where you work. Help them develop a work ethic so they understand that making money is much harder than spending it.
Train your children to have goals at every stage in life
Don’t just give them things. Tie “rewards” to age-appropriate accomplishments. Make sure that they have attainable goals even as children. Don’t set the bar too high when they are young. You want them to build confidence.
Spend time with your children doing things that don’t involve money
Playing at a public park, going fishing, watching a movie are activities that anyone can do. Show your children that you can have a good time without spending large amounts of money.
Even if you are a self-made man or woman, there are dozens or hundreds of people that helped you achieve your success. Be grateful to them. Also be grateful to the waitress that brings you your coffee. Show your children that humility and gratitude go hand in hand with being successful.
Spend time with others who are not as fortunate as you
Don’t let your children grow up in a bubble with only the friends of other wealthy people. It will give them a skewed sense of reality.
What will you do?
Options one and two aren’t straw man arguments. Upon reading them you may say to yourself “Mike that’s obvious! I certainly won’t do that to my kids”. The obvious choice is option three. Sure. But if it were so obvious we wouldn’t have so many failed children of successful parents. It’s not enough to be aware of the problem. You have to dedicate time, energy and patience to executing these options.
If you are focused on building your company, it’s very easy to get on the slippery slope that leads you to a mistake. Many parents that indulge their children do so out of guilt. “I can’t go away with the kids this summer and I don’t see them on weekends so I’ll just buy them a nice car or pay for a trip to Brazil”. It won’t just be that one time. It will keep happening over and over again. Be conscious of this in order to avoid the problems so many other successful people have faced.