The hardest thing about upward mobility – the so-called American dream – is attaining it.
Perhaps the second hardest thing is this: Once you’ve risen from a hardscrabble upbringing and gained financial success, how do you pass the traits that helped get you there – hard work, accountability, passion and discipline – on to your children?
The natural inclination is to give them all the things you never had – and to shield them from the worries you experienced growing up. But that won’t help them long term.
“You can’t duplicate your humble beginnings for them,” says wealth management advisor Rebecca Walser of Walser Wealth. “But you can teach your kids the skills they’ll need when they’re making their own way in the world.”
Walser, a successful tax attorney and certified financial planner who specializes in working with high net worth clients, says one of her earliest memories is of being 4 years old and flipping a light switch in her home, only to have nothing happen.
“That’s when I learned about money and bills, and that if you don’t pay the electric bill, the lights won’t come on,” she says.
Her children – ages 9, 7 and 4 – haven’t experienced anything quite like that, but she still wants them to understand money. One way she accomplishes that is they get weekly allowances to cover their expenses, and they must budget everything for themselves.
“When we set a limit, we set a limit,” Walser says. “Mom and Dad aren’t going to bail them out if they are a quarter short on a toy they want.”
Here are some other tips Walser has for helping fortunate kids understand finances:
• Experiment with delayed gratification. Remember the old Stanford University “marshmallow experiments” from the 1960s and ‘70s? A child was offered a choice between one small but immediate reward (usually a marshmallow) or two rewards if he or she could wait until the tester came back after about 15 minutes. In follow-up studies, the researchers found those who could wait longer tended to have better life outcomes, as measured by SAT scores, body mass index and educational success.
• Don’t keep the kids in the dark. Children often are unaware of all the unseen expenses that go into running a household. Make sure they know there’s a cost for electricity, water, cable and home maintenance.
• Needs vs. wants. How often have you heard your child say, “But I need those jeans!” There’s a big difference between wanting a designer label and needing new pants. Tell your teen you’ll give her a reasonable amount of money to buy the jeans – but if she requires more for what she wants, it’s on her. It’s amazing how quickly kids change their mind about needing something when they’re paying for it.
• Work it out. Your children may not need or want to work, but a job can teach a lot about having a solid work ethic, the importance of getting a good education and competition in the marketplace. Volunteering can have similar benefits.
Parents want to give their children every advantage, Walser says, and that’s just what you’re doing if you prepare them to better deal with real-world financial decisions.
“A little tough love now will go a long way towards preventing an unwelcome sense of entitlement from your kids and keeping them out from under a cloud of debt when they’re older,” she says.
Walser has the support of her husband – from humble beginnings himself – whose family routinely says “the best thing my father ever gave me was nothing.”
Walser sums this all up by admitting that “finding the right balance, when you do have something to give, is the key to providing a more comfortable life for your children without quenching that inner drive that we all are born with to make something of ourselves – something that cannot just be handed to you.”
Rebecca Walser is a licensed tax attorney and certified financial planner who specializes in working with high net worth individuals, families and businesses at Walser Wealth (www.walserwealth.com). She earned her juris doctor degree from the University of Florida and her masters of law degree in taxation from New York University.