 |
|
 ! |
|
Judy Barber |
Raising Money-Smart Kids in Entrepreneural Familes The advisors for this second-generation rancher are suggesting incentive trusts that would reward her grandchildren based on the ranking of the colleges they attend. The highest lump sum would go to those grandchildren who graduate from Ivy League colleges, the least to those attending state colleges. Attending a technical institute to become an auto mechanic is not included in the pay-offs. Concerns like these about whether the younger generation makes good spending choices and how to promote their productivity reflect a common conflict among affluent parents. Many are torn between wanting to make their children’s lives easier than their own when they were growing up and wanting the next generation to be motivated, focused and not distracted by family wealth. Others believe children need to "earn their own way." Children can feel confused and resentful about being on a budget when they perceive that their parents are not. What is essential is that parents provide financial education. Communication, education and defined limits provide the best incentives for kids to grow up to be autonomous, money-smart adults who honor the family’s legacy and support what is in the best interest of the business. It isn’t easy to raise children to be independent and financially literate. Some parents feel fraudulent limiting their children’s funds when they could give whatever they want. Challenges for the next generation "I am eighteen and feel a fundamental conflict over the issue of growing up in a wealthy family. It is extremely difficult to learn about the value of money and how to manage it when my parents – my role models – have different freedoms, responsibilities and resources than I. The examples they set often contradict the lessons they’re trying to teach me." Our children learn the meaning of money largely from what they see us do and not what we tell them to do. There are many methods that promote healthy attitudes about money and motivation. Here are eight suggestions: 1. Set limits and provide financial ceilings Often, children from wealthy families and affluent communities make assumptions about what they believe they should have, based on what they experience in the home and with their peers. It’s tough to say "No" when you cannot tag it with, "We cannot afford." Regardless of the number of zeros at the end of a net worth statement, most often there is a ceiling. Whether investing in business ventures, giving charitably to the community, earmarking funds for long-term estate planning transfers or a general discomfort in spending up to one’s means, "ceilings" are a reality. It is useful to say, "It may look like there is unlimited money but that’s not the reality. We have limits too. Part of our job as parents is to support you in learning how to manage money. That means you have a certain amount of money that covers specific expenses." Comments like "you need to learn the value of money" or "money doesn’t grow on trees" are often felt as criticisms. Many kids don’t have the foresight to plan nor the maturity to absorb their mistakes. 2. Provide role models Learning about money is more than mechanics. Kids need to understand the limits of what money can buy. We need to be conscious of our own values and where they come from. For many of us, our parents are still inside our heads. As we go about our money lives, we may react to our parents’ money styles through obedience or rebellion or to a different degree, a combination of the two. The owner of a construction firm and father of a fourteen-year-old boy says to me, "Since he wants this fancy scooter with all the bells and whistles, he can buy it himself. That’s what I had to do when I was his age." The father tells me about his own experience of growing up in a household with little money and his resourcefulness in getting what he wanted. I suggested that his own childhood experience was not a good reason for making his son buy his own bike. If he believed his son should pay for the bike then he could tell him, "You need to buy the bike because it’s important for you to have the experience of planning, saving and living with your decision." Separating our own childhood from our children’s lives keeps us grounded in the present. Understanding how we would have liked our parents to handle our childhood sensitivities – both in the way they handled us and the way they managed their own behavior – helps to keep us honest. 3. Use a matter-of-fact approach in teaching financial skills Managing money is a skill children learn, like riding a bike. It’s a gradual process built on a foundation of experience and safety. Ideally, the first experiences are limited. With age and expertise, children receive additional money and greater responsibility. 4. Clarify what you will and won't talk about Parents sometimes tiptoe around the topic of money to avoid questions they don’t want to answer: queries about income, credit cards, the value of a house, net worth and estate plans. We each have to find our comfort level in deciding which of these deeply personal issues to discuss and when. Timing is important in deciding what to say and when. We need to ask ourselves questions like: Can my son or daughter keep this in confidence? What kind of impact will this information have on motivation? Could this information be distracting to my son or daughter? Is there a consistent level of maturity? What are the limits of the information I want to share? 5. Give children an allowance to help them manage money An allowance is often the first concrete, regular financial interaction that parents have with children. From then on, every payday is a complex test of parents’ and kids’ values. An allowance can be a useful tool for children to learn how to manage money, rather than a system of rewards and punishments. Children need to participate in the responsibility of household chores as a member of the family. In my twenty-two years of working with the emotional/financial issues, I’ve come to one conclusion. Those who received a consistent amount of money to manage feel more confident about their ability to handle finances. 6. Allow children to make mistakes Just as most of us made mistakes with our money, our kids won’t always make the best decisions either. It is usually a mistake to bail them out. They need to learn from their errors. Many parents of adults agonize over continuing to fund lifestyles of their middle aged offspring, wishing they had let their children live with the consequences of their financial actions when they were teenagers and young adults. I’ve also listened to adults who continue to feel inadequate because they are financially dependent on their parents. Many don’t believe they can make it on their own without a safety net. The fear of failure, too much passive income and habits of affluence can also lead to a sense of privilege. 7. Look at the long-term when considering the employment of the next generation Members of the older generation are often ambivalent about the prudence of hiring the next generation right out of high school or college. There is also an uneasiness about bringing someone onboard who may have left school or another job precipitously. Often, "for the sake of the family," the older generation hires the relative anyway. Those decisions may trigger a harmful pattern of behavior on the part of both generations which is tough on family relationships and usually not in the best interests of the business. Jim hired his son Todd, now thirty-five, right out of college. He wanted to grow his successful insurance business and thought it would be great to have Todd help him out and later take over the business. Todd wasn’t sure what career he wanted to pursue. He’d thought about teaching and coaching, but his father talked him out of it. Jim told him he would never make enough money as a teacher and offered Todd double what he would make as a first year teacher. Over the past thirteen years, Todd has been a moderately successful sales person and now, along with his father, manages four additional sales agents and three administrative assistants. But there is constant tension between father and son. Todd is less collaborative with employees than his father and actually prefers to work alone. He is not driven by a sixty-hour workweek. He works hard, but he takes time off to coach his own kids’ sports teams, and he spends more time with his family than his father did. From Todd's perspective, he rarely gets a compliment and his father continues to tell him what he is doing wrong. Todd shrugs and says he and his dad are "just different." However, he feels that because of the barrage of criticism he’s suffered, he deserves his six-digit salary. He also believes his father should begin passing interest in the business to him. Jim is exasperated with his son’s relaxed attitude and disappointed that Todd has not followed his approach to leadership. He also believes that Todd could not keep the business together if he wasn’t there and worries that his own financial security might be at risk when he retires. Because Todd feels beaten down, he doesn’t have the confidence to look for another job and he knows that he would not make as much money someplace else. Jim believes another agent could do a better job of managing the sales force. Yet, he knows if he broaches that topic that he may lose the family ties as well. 8. Devise a family employment policy before it relates to members of the next generation Entitlement and dependence are bred in the growing up years and are re-enforced into adulthood when the older generation does not plan for the entry of the next generation in the business. Maintaining family harmony often forestalls these discussions. Also, disagreement in the older generation and awkwardness when a member of the younger generation requests employment may lead to no policy. Janet is the CFO and third generation member of a family owned real estate development business, which is mostly managed by her generation of siblings and cousins. Her parents, aunts, uncles and grandparents hammered out a family employment policy when her generation was still in their teens. She, her siblings and cousins continue to believe the policy is fair. Below is a summary: • Family members need to apply for open positions in the company. Jobs are not created for family members. • For those interested in working for the company, a minimum of two summer internships during college is required. • A college degree is required. • A minimum of five years of work experience on the outside is required before entering the business. • Those interested in management and executive positions must complete a graduate degree consistent with their career goals. • Whenever possible non-family employees supervise family employees. • Salaries and compensation packages are based on industry wide standards. Career promotions, raises and bonuses are discussed as part of formal annual performance reviews conducted by non-family managers. • The executive committee of the company, which is made up of family and non-family members, handle concerns regarding a family member’s employment. Take seriously the emotional, financial and professional development of the next generation This process can change a family business atmosphere designed around the desires of family members to an environment where family employees conform to the goals of the business. Training for this level of maturity and commitment to a family enterprise begins with talking to kids about money. With patience, educate them about saving, spending and giving it away. Set limits in a supportive manner. Then stand back and with as little judgment as possible, allow them to take risks, make mistakes and learn from experience how to confidently manage the money in their lives.
The
Family Money™ Consultants website is the property of Judy
G. Barber. Any Family
Money™ is a registered trademark. All rights reserved. ©
1993 by Judy |
