There’s a common pattern of wealth in families. The first generation of a family starts off poor. They know what poverty feels like and so they work hard, go to bed early and do everything they can to get a promotion. Their goal is to climb higher on the career ladder and get their children into the middle class. With a bit of money behind their backs, their kids eventually get a good education and are able to get higher paying jobs, a big house and go on holiday every year. Life is good for a while.
But then things go wrong. That middle-class lifestyle leads to third-generation kids who are spoilt and never know what living in poverty is like. As a result, they don’t have the “get up and go” attitude of prior generations. When they grow up, they drift from one activity to another, never really making any real money and relying on their parents for constant handouts. Without the discipline of going to work, putting in long hours and working their way up the professional career ladder, they end up squandering their talents and losing all the accumulated money of the family.
It might be cliched, but this rags-to-riches-to-rags story is very common. One of the reasons it’s so common is because of the unwillingness of parents to talk to their children about the family finances. For one reason or another, the subject became taboo, and kids get cut off from the reality of hard work that created the wealth in the first place.
If you want to have fruitful conversations with your kids about money, then you ought to pay attention to the following advice.
All parents want their kids to have a healthy relationship with money. As a result, they teach them how money should be treated and spent as well as the limits of money. For instance, money shouldn’t be frittered away on a whim. Instead, it should be nurtured and cherished because of all the hard work that went into creating it. They should also be taught to do things like compare personal loans, credit cards, mortgages and insurance to make sure that they get the best deal. Money can’t buy everything, of course. And so kids should gain an understanding that there’s more to life than the endless accumulation of wealth. Parents also need to back up these words with actions. Spending money on pointless things, like indoor waterfalls or massage chairs does little to teach children about the idea that money can’t buy happiness and could even cause them to overspend in the future.
Open A Dialogue Around Money
One of the reasons families keep their kids in the dark about money is that they want to preserve their ambition and drive. They worry that if they spill the beans, the child will grow up to be lazy and won’t lead a happy and fulfilling life. The problem is that one day, the child is going to receive a windfall – a massive payment of money that through inheritance. Not knowing how to manage that money can be a disaster and so it’s important to discuss money openly and give kids the tools to manage sudden wealth.