Why Wealthy Kids Don't Just Have It All Made in the Shade

To set your children up for success, money isn't the only factor. Parents have some major money lessons to teach, or they risk a rocky wealth transfer.

(Image credit: Stacy Vitallo)

A central goal for most, if not all, of our clients with children, is to make sure that their kids are in a position to succeed when they enter adulthood. As parents, they worked their entire lives to make life easier for their children than they had it, and to provide a great education and the freedom to follow their dreams.

For affluent families, one might assume that their children will start their adult life at the finish line. With proper estate planning and tax planning, their children will be the beneficiaries of a considerable estate, so, game over, right? Not so fast.

There are many variables that need to be addressed first. From financial education to stewardship, parents and their children have some work to do together to ensure a smooth transfer of family wealth.

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Financial Education

When children grow up in an affluent household, they may not understand the impact that one financial decision can have on other areas of the family’s finances. For instance, when they passed their driver’s test, they got a car. When they were accepted to college, they went to school. What they might not be aware of is how that car was paid for or how much it actually cost. They may not understand how a loan can be structured, how assets can be owned and used for payment, or even how a large down payment may save or cost money in the long run. To set children up for success, parents should sit down with them and explain how large purchases are evaluated, planned for and made.

In my experience, the most impactful lessons are ones that directly affect the next generation. These opportunities will naturally occur as children grow into adulthood — don’t let them pass you by. When your son or daughter needs a car, apartment or prepares to begin college, take advantage of the fact that they now have some skin in the game and use it as an opportunity to talk through the decisions. Too often, affluent parents simply handle the bills and perpetually delay these discussions, missing the opportunity to talk though real-world examples.

Long-Term Goals

Another key component to bridging this gap is explaining and discussing long-term goals and planning. Like everyone else who’s consumed media on virtually any platform, your children have surely heard of investing and retirement, and may even have a grasp of their significance with respect to their family. However, it is far less likely that they have a good understanding of what planning is.

A prerequisite for discussing planning with your child is honesty — about the extent of your family’s wealth, long-term goals and the challenges you faced to keep your goals intact. In many families of wealth, the children know they live in a nice house, and take great vacations, but may have no real knowledge of the assets their family owns, what the liabilities are, or how much they actually stand to inherit. This can lead to a host of problems, including an overestimation of the family’s wealth or damage to the parent-child relationship inflicted by a perceived lack of trust.

Also important is listening. To have a meaningful conversation with your kids about planning, it’s imperative to be able to listen to what they hope to accomplish, without passing judgment or trying to “correct” their perspective. For example, if your child wants to start a high-end sneaker-trading platform, you should take the opportunity to talk through how one might get such an operation off the ground.

The value of the conversation is that by discussing these ideas in real terms, as peers, not only will you learn more about your child’s aspirations, but you drastically increase the likelihood that they will listen to you.

Family Vision and Personal Responsibility

One thing I’ve learned as a financial adviser for affluent families, is that while many business owners and executives are great at making money, far fewer have a clear understanding of why it’s so important to them. Aside from paying for their children’s education, the purpose of wealth is often hard for people to define.

In my experience, setting a meeting dedicated to the topic, and talking through my client’s concerns and goals, is a best practice I employ to help them define their family vision. Communicating this vision, and engaging their children to clarify the role they will play in the stewardship of the family’s wealth can be powerful tools to help fill that generational gap. And the lessons of stewardship — which typically include budgeting discipline, coordinated planning and asset protection — are incredibly valuable, and will likely prove to be far more important than the actual inheritance they receive.

The question parents need to answer as they build the foundation of their children’s success isn’t how much money to provide, but rather, how prepared will they be to manage and protect it. In our society, money is a taboo subject — parents are trained to refrain from talking about it. I encourage you to break the norm, tell your children your goals and ask them about theirs. It will only increase transparency and trust with the next generation.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Casey Robinson, CFP
Managing Director - Wealth Planning, Waldron Private Wealth

Casey Robinson is the Managing Director of Wealth Planning at Waldron Private Wealth, a boutique wealth management firm located just outside Pittsburgh. He focuses on simplifying the complexities of wealth for a select group of individuals, families and family offices. Robinson has extensive experience assisting multi-generational families with estate planning strategies, integrating trusts, tax planning and risk management.