Oct 4, 2012

Kids "Unfit to Inherit" ???

CNBC published an article by Robert Frank a few months back, about parents who are leaving their millions to charity instead of their children. "Only 32 percent of baby boomers are confident their children will be prepared emotionally and financially to receive a financial legacy."

Whose fault is this? Let's assume this is not inherited wealth. (I assure you, multigenerational high net worth families groom their children for succession. It's what keeps the wealth in the family.) Boomers, who perhaps built a business from scratch and worked hard to become wealthy, focused all their attention on the business, but stopped short of pondering the fact that they may die one day, and planning for eventual maturity of their children to take the baton.

Frank's assessment:
In the end, however, the phenomenon outlined in the survey boils down to a simple problem: The baby boomers have raised kids who are unequipped to inherit large amounts unearned wealth. The kids have been given most of what they want since childhood and have followed their parents model of generous spending. And the job market isn’t exactly conducive to college grads making it on their own. [...]

Whose fault is all this? The parents, in part. Only half of the respondents had told their children about their family wealth. When asked why, they said the children would become lazy, make poor decisions, squander money or fall prey to golddiggers.

We can call it the Rinehart Paradox. Wealthy parents aren’t raising kids to be good with wealth, so they refuse to leave them wealth.

In the end, the biggest losers here are the kids.

That's tantamount to tying your kid's shoes because it's easier than teaching him to tie them himself. Really? You're going to be around when he is 30, still tying his shoes? You will cripple your children emotionally when you FAIL to teach them about your finances, financial strategies, where the money comes from, where it goes, and WHY you made the decisions you did with it. 

Whose shoes will you stop tying today?

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