Raising Children in Affluent Families
by Barton Goldsmith

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This article by Psychotherapist and international speaker, Dr. Barton Goldsmith explores challenges that often arise when raising children in affluent families.

o Introduction o Dr. Barton Goldsmith Bio o Generosity Vs. Favoritism o Motivating Children o Respecting Money o Discussing Finances With Family o Subsidizing Finances o Repayment of Loans o Children and Work o Discussing Will Provisions o Charitable Behavior o Additional Resources

Introduction

All families face difficult challenges throughout time. However, in situations where extremely affluent families are raising children, additional challenges are often presented.

According to Dr. Barton Goldsmith, a communications expert and international speaker, if children know they’re getting support and love from their parents, they will not be as concerned about family finances. However, when children feel like they’re not getting enough love, support and attention from their parents -- or when a parent’s total focus is on money -- the children often become focused on the parent’s wealth.

The bottom line, says Dr. Goldsmith, is that money usually becomes an issue only when children are not getting their emotional needs met.

Dr. Barton Goldsmith Bio

Psychotherapist, international speaker and management consultant Barton J. Goldsmith, Ph.D., has spent more than two decades teaching communication skills that can de-escalate confrontational situations. In his work with couples and families, Dr. Goldsmith provides practical and down-to-earth techniques that provide a non-threatening forum for families to work out their difficulties.

In addition to serving as the director of Organizational Psychology at Streamside Counseling, Dr. Goldsmith also is a faculty member at Ryokan College and vice president of Universal Education Centers.

He has authored several books including Passionate Leadership, Spiritual Steps-Affirmations for Self-Discovery, Relationships 101 and A Garden of Thoughts with best-selling author Louise L. Hay.

Below are several commonly asked questions regarding raising children in a wealthy family, along with Dr. Goldsmith's answers, examples and recommendations.

Generosity Vs. Favoritism

Question: How can parents differentiate between generosity and indulgence?

Answer: Here is an example of being generous without being indulgent. I know of parents who had an indulged son who had no motivation to strike out on his own. The parents responded by buying a beat up house for their son.

The parents gave their son the option of living in the house as is, or fixing it up, selling it and starting his own business. They knew their son was a talented carpenter and that he enjoyed working with his hands. The son fixed up and sold the house, and continued buying, fixing and selling homes with the money he made -- all without further contributions from his parents.

His parents taught him how to be successful not by giving him things, but by supporting him. The parents had the resources to buy a nice house for their son, but they didn’t. The son worked hard to make his new business adventure successful.

The parents were generous enough to give him the "seed money" to start his business, and were able to counteract their earlier indulgence and create a purpose for their child.

Motivating Children

Question: Can indulgence lead to lack of motivation?

Answer: One example of how not to motivate your children involves parents who indulged their children by keeping money in a jar. They began with a penny jar. Then, as the children got older, they used nickels, dimes, quarters and eventually dollars. The money was always there for the children to use whenever they needed it.

The children are now unmotivated adults because they don’t know the value of money. The topic of the responsibility of money was never discussed. The children thought that money did "grow on trees," or in this case, "grow in jars," because it was always available for them.

To motivate children, it is important that parents don’t give their children so much that they aren’t motivated to do things for themselves. When parents give their children too much money, the children will eventually depend on the parents.

For motivated children, it doesn’t matter when you give them the money -- they’ll always do well with it. For unmotivated children, perhaps it’s best to skip a generation and give the money to the grandchildren.

Question: What can parents do about a child who seems unmotivated?

Answer: Seeing a parent's enormous success can be overwhelming to a child and actually become a de-motivating factor in the child’s life. It is important to speak candidly to a child who thinks he or she can never accomplish all that the parent has. Talk about the child's strengths. And, allow them to see your own weaknesses as well as your strengths.

Children need to see that their parents struggle, too. Ask your children what is causing them to feel unmotivated. Be open and honest about your struggles so your children know it's OK to be open and honest about their own struggles.

Create a safe environment for children to share their feelings, and share your own feelings in the process. Be an active listener, and let them do most of the talking.

You need to set your child up for success. How you feel about success spills over into how your children see it. Do a family or personal mission statement with them. If they had unlimited time, talent, resources and support, what would they do with their lives?

Find out what they’re passionate about. Elicit that information from them, spend as long as it takes and don’t give up on them. This will assist them in making future decisions.

Respecting Money

Question: How do you get children to respect money?

Answer: One example of a way to get children to respect money is the story of a credit card and a 19-year-old son. When the son had difficulty paying off his credit card debts, his father refused to pay off the son's balance. He realized that if he came to his son’s rescue, he would hurt him in the long run. The son paid off the debt, and has not made the same mistake again, in fact, he has become more financially responsible.

Although the father didn’t bail the son out when he got in trouble, he did help him gain the self assurance of knowing that he could get out of a difficult financial situation without his parents’ assistance.

Another option would be to make a repayable loan to the son. But be warned, parents will have to deal with their own issues of guilt (for not helping more) as they encourage their children to deal with their own problems.

Discussing Finances With Family

Question: What do you tell teenagers and young adults about the family’s financial position?

Answer: This is the type of topic often discussed at a family meeting, which I recommend having about once each week. It's important for parents to be honest with children about money.

Instead of telling children we have "X" number of dollars, tell them we have bills to pay and this is what we do to pay those bills. Tell children about the times you didn't have money and were worried you couldn’t pay due bills. Teach them the value of money over time, and that you save money when you have it in case there is a time down the road when you don’t.

Question: What’s wrong with telling children how much money you have?

Answer: Telling children exactly how much money you have may reduce their motivation to succeed on their own. As a parent, you need to know your own children and gauge how much to tell them about finances.

What’s most important is that children have their own goals and dreams to succeed in life and that they don’t just want to live off of your money. Most times, unsaid things get noticed. By the time children are 16, they usually know how much you have whether you tell them or not.

Subsidizing Finances

Question: What is the best way to subsidize a child's finances? Should there be strings attached?

Answer: Be cautious when attaching strings and trying to manipulate your children. There should always be a connection/reason/understanding of where the money came from, what it is going to be used for and what the conditions are for use and/or repayment. Parents should be careful not to give the impression that there is an endless supply of money. The key is to establish an understanding, a direction and the expected results.

Giving children money does not buy their time or loyalty, and should not obligate them to do something that should come from their hearts (and yours).

There is no right answer regarding how to give money. How you give money to a child is determined by how you best communicate with your child, balancing their needs and desires with yours. It is with desires that strings may be appropriate.

Question: What are the pluses and minuses of subsidizing a young adult's finances?

Answer: Subsidizing, if done at all, should be done only for a limited amount of time. Subsidizing can be de-motivating for children and can take away their incentive to succeed on their own.

One benefit of subsidizing children for a predetermined time is that it gives them the confidence and a safety net to strike out and make it on their own (remember the example of the parents -- in subsection Generosity Vs. Indulgence -- who bought their son the fixer-upper house).

One strategy may be to match the funds a child makes in an investment account. Manage the account together. Teach the child about compound interest. Teach him or her about how money works. Make it a joint account so a parent has some control. This investment account also provides an opportunity for increased communication between a parent and child.

Don't take away the opportunity for a child to make it on his or her own. Otherwise, experiences and the successes or failures will not be solely his or hers.

Repayment of Loans

Question: What do you do when one child makes due on a loan and another doesn't?

Answer: Don’t keep giving money to the child who doesn't make due. Be aware that the other children are keeping track of how much you’ve been giving to each. The child not making due needs to be educated about finances.

Find a way for the needy child (even if it requires a subsidy) to start creating some income for themselves. Chances are that once they get over the initial fear, it will be easier for them to make their own money and repay you yours.

It is important to start teaching your children about money as early as possible by using age-appropriate tools.

For example, by giving children a savings or investment account or allowance, they get to see their money grow and will be less likely to spend it unwisely. They learn the value of money and keep their spending habits in check. They’ll buy a $20 dollar shirt instead of a $100 shirt because they’re paying for it themselves. Also, they’ll be more responsible when they have total ownership over the account and get to keep the earnings/growth, etc.

Children and Work

Question: At what age should children have a job?

Answer: It doesn't matter. What is important is to match the appropriateness of the job to their age. Show your children how to manage their money, help set up a budget, show them how to do a ledger, etc. Many parents are amazed at how this helps their child's self esteem.

Summer jobs are a wonderful opportunity for children to learn a sense of responsibility. And, if nothing else, it may teach them what they don't want to do when they grow up.

If they want to waste their money to obtain immediate gratification, experiment with giving them access to only small amounts and see what happens. A major difference between children and adults is that adults know how to delay immediate gratification.

If children do not have jobs, it is important to ensure they are working toward a goal and have been educated about money and finances.

Discussing Will Provisions

Question: What should parents tell their children about will provisions?

Answer: This is a personal decision based on whether or not a parent is going to leave their child anything and how that will affect him or her. If a parent is leaving one child more than another, it's best to explain the reasons beforehand to avoid breaking up the family after the wills contents are disclosed at death. If parents are leaving their children equal amounts, that also should be communicated.

Its not necessary to give specific dollar amounts. However, it is necessary to think about the impact this money will have on the children’s lives, both positive and negative. In addition, if you're giving money to other people, charities, etc., this should be addressed so that there are no surprises or hurt feelings.

Question: Should you give your children money while you're still alive rather than waiting until after death?

Answer: I’d advise all affluent families to look at the tax implications of giving their children large amounts of money prior to a parent’s death. Paying for a child's education or providing funds to help start a business are common. If successful, then the children won't need your money. If they go into something that doesn’t make much money, you may want to start giving them money after they’re 35 years old. Always give money over a significant period of time, never all at once.

One option may be to set up a joint account to help your children decipher the difference between their needs and wants. With a joint account, they will have to tell you why they want to spend the money before getting access to it.

A signal of maturity is when the children want to use the money to help out someone else who is in need. That is probably when they are mature enough to handle the family wealth.

Charitable Behavior Question: How can parents demonstrate to their children their willingness to give back to society?

Answer: Have a child begin donating a percentage of his or her allowance to a charity at a young age. Also, have them donate time to various causes. These organizations will help find age- appropriate activities.

Children learn what they live. They will model the behavior of their parents.