Cultivating certain traits can nip kids' sense of entitlement in the bud
Instilling these half-dozen qualities in young people can help them make the most of themselves, their family legacy
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Inherited wealth can have its disadvantages. As early as 1815, Jane Austen described the heroine of her novel Emma as “handsome, clever, and rich.” The book demonstrates why this is in fact a problem, because no one in Emma’s family circle has taught her how to use her wealth, power and influence wisely.
The stereotype of the trust-fund baby, who lacks the kind of drive that made their parents’ fortune, is pervasive.
“I’m always hesitant to make wild generalizations, but based on my experience with real-life families, I would say that we come by that stereotype honestly,” says Toronto-based researcher and author Barbara Stewart, who spent two decades as a portfolio manager for high-wealth families and now writes for the CFA Institute and other finance-related organizations.
“It’s not that all next-gens will be less successful than their parents; I’ve seen it go both ways,” she says. “They may not be destined to become a successful entrepreneur, but they will have a better chance with proper training and observing real-life role models.”
In all areas of our lives, we can either be purposeful or we can blow where the wind blows us, says Krista Han, managing partner for New Brunswick with the accounting and advisory firm Grant Thornton LLP, based in Fredericton. “My analogy is: would you like to be a swimmer or would you like to be the seaweed?
“Whether or not you are purposeful, your kids will learn from you. You have a choice about how you show up.”
Some of the skills that make a successful entrepreneur, a good money manager or simply someone who uses wealth wisely to build a good life for themselves and others simply cannot be taught. But as young people reach early adulthood, they can build qualities that will prepare them to make the most of their family legacy.
Resourcefulness and determination
Krista Han names two pairs of attributes. The first is resourcefulness and determination.
“The truth is, because the parents enjoy wealth, they have outsourced a lot of tasks that they learned to do at that age,” Han says. Therefore, their children may never have had the opportunity to strengthen that backbone of inner resolve.
Parents can help by standing back and allowing their children to try something out, fail and try again, instead of fixing every problem for them.
Communication and curiosity
Han’s second pairing is two terms that you wouldn’t necessarily put together: communication and curiosity. “The reason that they are so critical is because that’s how we connect with each other,” she says.
Deep communication and creativeness are key entrepreneurial skills, she says. These qualities can be nurtured through involvement in the arts, being part of a sports team, taking a summer job with the family business or perhaps handling a philanthropic project of their own.
One of the big ones: Gratitude
The No. 1 trait that can short-circuit a sense of entitlement is gratitude for what you have in life, says Adam Hoffman, an advisor with Vesta Wealth Partners Ltd., a family office in Calgary.
And don’t forget grit
When Barbara Stewart interviewed Canadian entrepreneurs as background research for the Canadian Entrepreneur Report 2021 from Echelon Wealth Partners, she found that “grit is the skill that matters most,” because “the only difference between being a success and being a failure is giving up.”
Her interviewees also offered nuggets of wisdom they considered essential: invest time in yourself, start networking early, question the status quo, and understand why you exist in the world.
Familiarity with wealth and the family business
The more you talk about wealth with the next generation, the more it’s going to become natural to them, says Justine Delisle, a partner with Richter Family Office in Montreal. “It’s all about the values that you pass on to the next generation and reinforcing the fact that wealth is a privilege and a responsibility, and we need to take it very seriously.”
Krista Han says it’s common now for families to hold an annual meeting that includes time for structured learning (financial literacy, for instance, or the history of the family business) but also for relaxation and intergenerational mingling. She mentions one family that holds family “Olympics” with events like a three-legged race where a 64-year-old and a three-year-old might be teamed up together.
More from Canadian Family Offices:
- Five smart ways to transfer wealth to your children, grandchildren
- Paying the absolute lowest in tax no longer top priority for today’s families
- Recent changes to Canada’s tax laws could be costly to family businesses
- Money-related disorders are proof that wealth can’t fix everything
Barbara Stewart mentions one family with children between the ages of 4 and 8 that sets up bank accounts for the children and even stock portfolios, so they can buy fractional shares in brands they know (like PepsiCo, the maker of Cheetos). By discussing interest earned and stock fluctuations, the parents help children learn about money and the value of planning, saving and investing.
Stewart’s research with Canadian entrepreneurs shows that many believe in involving their children in the family business in early adulthood and even younger.
Tapping professional resources
But when it comes to the nuts and bolts of managing wealth, professional assistance can be invaluable, Justine Delisle says. To that end, her firm administers its own proprietary Richter Financial Literacy Program to teach next-gens about 10 key competencies, such as taxation, life insurance and risk management.
“What I love when I assist the family on the educational piece is that it sets the ground for family governance. They can have family meetings that are more productive. The program triggers discussion; even the previous generation learns,” she says, adding that the program can be the springboard to further steps such as building a family charter.
Not all next-gens are created equal, and there is no single “best” way to prepare each rising family member to find their role within the family.
“It’s easy to talk in generalities and make sweeping recommendations on best practices, but one other aspect to consider is the individual needs of each of your children,” says Han.
“Family businesses can get really hung up on what’s fair or what’s equal, but the truth is that some children need something unique and different than the others, and that’s okay. Any parent or teacher knows this innately,” she says.
“So I wouldn’t get too hung up on the fact that some kids need more than others. I would concentrate on each child and how you can support them.”
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