Over the past 25 years, I’ve spoken to hundreds of high-net-worth (HNW) individuals. They all come from different backgrounds, but there is a common thread that draws them together: fear. Specifically, fear for their children.
A recent survey by American private banking giant U.S. Trust articulates these concerns. The survey interviewed 457 high-net-worth Americans between January and March of this year. Each respondent had $3 million or more in “investible assets” (i.e., excluding principal residences).
Here are some of the most interesting findings.
- only 34% of parents “strongly agree” their children will be able to handle the inheritance they plan to leave them;
- only 36% “strongly agree” their children will be able to work together to make decisions to manage the family wealth after mom and dad are gone;
- just over half (52%) have not fully disclosed their wealth to their children, and another 15% have disclosed nothing at all. Why? Because of concerns about how it might affect their children’s lives, and/or that their children might squander the family wealth;
- only 12% of respondents think it “highly likely” that their sons and daughters will be as wealthy or more wealthy than they are; and
- 50% of respondents have never discussed with their wealth advisers ways of teaching children to handle wealth responsibly.
It’s this last statistic that bothers me most. Financial professionals have a duty to discuss the emotional issues surrounding wealth and family. If we don’t, then we’re encouraging what amounts to financial illiteracy. And the consequences of financial illiteracy are serious, both to HNW families and to our society as a whole: wasted wealth, wasted opportunity, and, ultimately, wasted lives.
One solution to this problem is to involve your kids in philanthropy: doing good work with wealth, for the benefit of others. There are a number of different ways to do this; one of the more intriguing is to take the kids on a philanthropic vacation, a trip where the family helps others by volunteering for an important cause in another country.
I’m not suggesting that such a trip should in any way replace ongoing work for local charities. Rather, it serves as a wake-up call – a way to make kids understand that they come from a position of abundance, and that they should never take wealth for granted.
I know a handful of HNW families that have taken such trips. They tell me it can be an excellent way to give wealthy kids a sense of accomplishment and purpose – something that can be difficult when you grow up in the shadow of highly successful parents.
Do a little digging on the Internet and you’ll find a wide variety of causes that need volunteers: building schools in Ethiopia, restoring coral reefs in Antigua, coaching a soccer team for impoverished kids in Peru, etc. What’s more, such volunteer vacations are surprisingly affordable: most of the time, charitable organizations provide basic food and accommodation, and some even offer special deals on airfare.
One idea is to couple such a trip with a more traditional vacation – a week volunteering, a week relaxing.
The R&R on the beach can serve as a reward for a job well done, and an opportunity to “debrief” on what the family has accomplished for others.
Over the course of a lifetime, I believe such experiences will pay recurring dividends. So much so that our family has decided to do it. We’ll be helping Homes of Hope build a home for a needy family in Mexico. I encourage families of all levels of wealth to do the same.