Your wealthy clients are worried that their kids are growing up with an affluent lifestyle and not learning the two things that contributed to their ability to provide such a lifestyle: hard work and money smarts.
Children of affluent parents might need to be taught in a little different way to make sure they "get it."
People who have a financial advisor are usually pretty successful, and many are considered affluent. Over the years, I have asked numerous clients what they feel attributed to their success. With few exceptions, their answers are the same: They work hard and make good decisions with their money.
But these same people are also really worried. They’re not worried about making their next mortgage payment (they might not even have a mortgage), or making the minimum payment on a credit card (they likely pay it off each month). Instead, they worry about their kids. That’s right, they worry that their kids are growing up with an affluent lifestyle and not learning the two things that contributed to their ability to provide such a lifestyle: hard work and money smarts.
So how can you, as their financial advisor, help put this worry to rest? Here are three pieces of advice you can relay to your affluent clients.
1. Don’t cultivate entitlement; instead, tie work to reward
When I was young I had to mow the lawn, a lot of lawn, in the middle of August in Phoenix, Arizona, to boot! Many children growing up in affluent neighborhoods don’t have these opportunities any more. They watch out the window as a maintenance crew shows up and makes the yard look beautiful with seemingly little effort. When it comes to chores and allowance, there is plenty of debate. Call it what you want: allowance, commission, work-pay, whatever, but that money they earn needs to be tied to family contribution and help teach kids develop a strong work ethic.
Help your clients understand that giving their children an allowance not tied to contribution only encourages the entitlement mentality.
Getting something for nothing has never been a formula for success. Reinforce that they don’t need to pay their kids for every little thing they do around the house. Of course some things are just expected, but if it is above and beyond the call of duty, make it worth it. This will create opportunities for them to earn money and provide occasions for meaningful discussions about money decisions. Consistently doing jobs around the house will help stem off that entitlement mentality that so easily creeps into a child’s mind.
You can also encourage your clients to implement some delayed gratification with their kids so that they don’t think that just because they want something, they should have it right away. When kids from affluent families receive what they want without having to wait or practice some self-control to get it, it seems to feed that sense of entitlement. And if it’s not kept in check, it can get out of control really fast.
2. Encourage your clients to be open in discussing matters with their kids
The days of keeping things hush-hush when it comes to finances are over. Ninety-five percent of parents feel it is their responsibility to teach their kids about money, but only 26 percent feel comfortable doing it. To reverse this trend, start with some small steps. Let the kids know how much the electric bill is next month. I did this last summer when our electric bill was over $700. (Yes, Arizona again. The A/C
seems to never turn off in the summertime.) However, just by letting them know how much it costs helped them become a little more mindful about not leaving the door wide open the next time they went outside. That’s one less time I had to tell them to close the door. (I may be turning into my father.)
Also, encourage your clients to let their kids know how much it costs to fill the gas tank of the family car. Just a simple, “Hey, look
at the numbers on that pump!” can be an eye-opening experience. In April of 2011, the average amount American households spent on gas was $368.09. That’s just one month. All that running around from soccer practice to school adds up. Kids are smart. When they are aware of these costs, it will help them when they are making their own decisions about money.
3. Encourage your clients to discuss big-ticket financial items with their children, like the value of their house and what having a mortgage means
They can look up what your home is worth on sites like Zillow.com anyway, so don’t think it’s a big secret. Clients can start sharing this financial information with their children and empower their kids by not leaving them in the dark. Once they realize the costs of running a family and what it means to budget, you’ll be surprised at how quickly they start learning how to make better money decisions themselves. You might even want to encourage your clients to start using budgeting software like Mint.com to help them get a really clear picture of their expense. All of these suggestions can make it easier for your clients to have money-related conversations with their children. These conversations will impact your clients' children for years to come.
So, next time you have a meeting with your client, how about reinforcing what they can do to teach their children the secrets to financial success and, at the same time, help them sleep a little better at night?
Steve Savant recently shared that How end of the year charitable giving strategies can benefit taxpayers with Mike Kilbourn, CLU, ChFC & Rob O’Dell, CFP, RIA on Let's Get Down to Business http://youtu.be/anDf0iGbVbY