Preparing Your Heirs for Success
Many parents take skillful steps to set up their kids for success – a good education and introductions to job opportunities are reinforced with tutors, coaching, and plenty of financial support to get the kids off to a good start.
Helicopter Parents and Tiger Moms have been surpassed in involvement by Snowplow Parents, who consistently remove obstacles from their kids’ paths. Seemingly nothing will stand in the way of these parents and their children’s future successes.
Wealthy parents might ask: What’s wrong with this? It turns out these parents are not alone in their motivations.
In recent book Love, Money & Parenting: How Economics Explains the Way We Raise Our Kids by Matthias Doepke and Fabrizio Zilibotti, the authors take an international and historical look at how parenting choices change in the face of economic inequality.
Spoiler alert: Snowplow parenting is not confined to the United States, Western economies, or even developed nations. Parents around the globe intervene in their children’s development to varying extents.
Snowplow parenting occurs most frequently in countries that have: (1) greater economic inequality; and (2) high social mobility. In other words, in countries like China where income inequality exists between rich and poor and success will allow citizens to increase their standard of living, parents respond by taking a greater active role in their heirs’ successes.
In countries like Sweden where everyone earns about the same amount, receives national health care and retirement benefits, and children tend to follow in the same careers as their parents, the parents tend to take a more passive approach to family life.
Conifer Bay Capital believes the secret is to strike the right balance between the two. Encourage your heirs to take risks and get out of their comfort zone. They will make plenty of their own mistakes, but failure is often a great teacher.
Best practices for your wealthy family may include these parental objectives:
Help your kids learn the value of hard work. Encourage them to find a job earning money early. Whether a lemonade stand or walking the neighbor’s dog, the earlier they wrap their head around the idea that work can be fun and rewarding, the better. Fewer unpaid internships, more paid jobs.
Get them some career coaching. Most adults gladly pay for a golf lesson, ski instructor, or tour guide in Rome. So why do people try to figure out their careers by themselves?
Career coaching, sales training, and executive or leadership coaching used to be offered by large companies, but these benefits are getting cut in the new gig economy. Your heirs may benefit from a good career coach from time to time. Often these coaches are a free benefit to college or graduate school alumni. Freelance professionals also are readily available.
If you want your kids to figure out how to leverage their inheritance, combine it with their own successful career to create their own second-generation wealth.
Set your heirs up to inherit some of your values in addition to your assets. Many wealthy families spend a small fortune to turbo-charge investment returns, reduce taxes, and pass assets efficiently to the next generation. Very little thought is given to passing on values.
Sadly, bad decisions, taxes, divorce, and other headwinds can quickly consume an inheritance. Values are an asset that can last forever.
Your values are unique to your own experience but they probably include hard work, faith, giving back to people in need, the importance of family, and experiencing the world. Encourage your kids and grandkids to identify their own values … you might discover that theirs are very similar to your own!
Wealthy families need to think creatively about how to prepare heirs for success. The right solution lies somewhere between snowplow parents and absentee parents. Include strategies that will encourage these family governance best practices in your 2020 goals.