You may have seen the images on the Rich Kids of Instagram page which features the young super-rich on private jets quaffing bottle after bottle of expensive champagne and showing off their obvious wealth for the world to see. For parents who have worked their entire lives to get to a place of privilege, the sight of their children recklessly spending money and showing off their extravagant lifestyle can leave a bad taste in the mouth.
According to the Harvard Business Review, children who don’t learn how to value money can end up destroying their families’ wealth by the second or third generation. The publication quoted a study conducted by wealth consultancy company The Williams Group, which found that 70% of wealthy families lose their wealth by the second generation, and 90% by the third.
READ MORE: Who will get Prince’s wealth?
Growing up, many people were taught not to speak openly about money because the subject was taboo. However, business tycoon Warren Buffett believes in the importance of teaching your children how to manage money and how to become successful. This idea spawned a cartoon series in 2013 called Secret Millionaires Club which teaches young children how to be financially savvy.
Buffet believes it’s important for parents, wealthy or not, to teach their children the value of money at a young age.
While kids who come from poorer families will probably learn about the value of money from the “school of hard knocks” and being the recipients of life’s reality checks, wealthier children are more likely to cruise through life without learning any of these lessons.
READ MORE: 5 reasons why you aren’t wealthy
There are several ways to ensure that your children know that money doesn’t grow on trees. According to the Harvard Business Review, there are many ways to talk to your kids about wealth so they know how to deal with it responsibly.
Be transparent about your wealth
Treating the topic of finance with kid gloves may cause children to make assumptions about how much they have and what they can demand. It’s crucial to talk to your kids openly about your wealth – however, it’s important to make it clear to them that it’s your money, and that their current lifestyle isn’t self-made but dependent on you. Make it clear what you will and won’t help them financially with from the start so they understand where the limits are and what they’re responsible for getting for themselves.
“An unlimited financial safety net can stifle a child’s ability to build character and self-confidence while learning important life lessons by overcoming difficult situations,” says the Harvard Business Review.
Foster a culture of hard work
Several extremely rich people talk of starting from scratch with less than two cents to rub together. This trait of working hard to earn their vast amount of money and valuing every cent has had a part to play in their success.
Actor Jackie Chan once famously spoke about his reluctance to leave all his money to his children.
“If he is capable, he can make his own money. If he is not, then he will just be wasting my money,” he said about his son to Channel NewsAsia
Other wealthy parents, such as David Beckham and Kourtney Kardashian, ensure their children do household tasks like taking out the rubbish to earn money.
It’s also important to ask your children what they want to achieve, and guide them on how to go about reaching their goals and attaining their own levels of success.
Let them know it’s okay to want to be rich
Society seems to have a schizophrenic relationship with money. It’s sometimes described as the root of all evil, yet people can’t seem to get enough of it. There’s nothing inherently evil or bad about having a lot of money. In fact, being wealthy means you’re in a position to help change the lives of others.
Some of the world’s richest people are also some of the greatest philanthropists. Microsoft co-founder Bill Gates’ Bill & Melinda Gates Foundation does great work around the globe. Facebook founder Mark Zuckerberg famously announced in December last year that he would donate 99% of his Facebook shares to the cause of human advancement.
Sources: Harvard Business Review, Channel NewsAsia