Wealthy families are taking steps to prepare their children for the responsibilities of affluence from a young age. This approach helps protect wealth for future generations. Wealth managers say talking to kids early about the privileges and dangers of wealth increases the chances of success.
Nji Lorimer, a senior wealth planner, cites the saying “Clogs to clogs in three generations.” It highlights the risk of entrepreneurs seeing their wealth lost due to lack of planning. “The second generation often guard and cherish the wealth, having seen their parents’ hard work and sacrifices,” Lorimer explains. “But the third generation, who have only known affluence, can end up losing the wealth without proper guidance.”
Lorimer says early coaching on how to protect, grow, and spend wealth responsibly is key to breaking this cycle.
He stresses that educating the next generation is a team effort. It involves wealth creators in the family and advisers who provide counsel. Wealthy families are turning to banks and wealth managers for formal financial education.
“Next Generation Academies” teach about the responsibilities of wealth. They include games, role-playing, discussions, and hands-on training. They also offer networking and a chance to build relationships.
UBS Global Wealth Management runs programs to bring together NextGen investors of different ages and experiences.
Preparing kids for wealth responsibilities
Viola Werner, head of global next generation solutions, says: “Next generation clients need to be included as early as possible in discussions about wealth transition and legacy.”
Werner sees growing financial confidence in the NextGen.
She attributes it partly to their willingness to learn from each other by sharing experiences. Experts say creating a two-way dialogue is important. The older generation can reassess investment strategies while the younger generation learns the family’s vision for wealth.
Anna Jones, a financial planner at Progeny, says the firm hosts an annual summer school for clients’ kids. It offers insights into financial planning and professional services like investment management. Jones says giving children some control over family wealth is crucial.
Setting up trusts to pass money to children while reducing taxes often gets them involved in investment decisions. Annick Crisford, a client adviser at Rothschild & Co, finds philanthropy can be an effective teaching tool. It shows kids the value of money, gratitude, and giving back.
Crisford notes that clients often worry their wealth might demotivate their children, especially when the parents are self-made. Letting children make controlled mistakes early on can help them appreciate the importance of careful money management. By starting financial education early, wealthy families can better ensure their wealth is preserved for generations to come.
