Rich People and Their Kids

Friday’s edition of Wealth Matters in the New York Times told us about the children of rich people. Turns out that if you are rich enough, instead of just relying on your spouse, you can hire somebody to tell you what a lousy parent you are.

One of the several intriguing things about Wealth Matters is that the author apparently doesn’t know any rich people, or at least none that will allow him to quote them. Instead, the columns seem to be written based on talking to people who talk to rich people. Or so they claim.

Sources for this week’s installment include a partner at a consultancy called Relative Solutions which "works with family businesses" and a partner at "BBR Partners, an adviser to ultra-high-net-worth clients." I suppose that both are keen to be quoted because they hope potential clients will read the column. I’m not sure that’s a sound business strategy.

What these advisors to the rich reveal is that if you’ve got so much money that your kids will never need to work for a living, it is hard to get them to work for a living. Good to know.

The Millionaire Next Door discussed this problem, sorta. It spilled a lot of ink on the dangers of giving your kids money. I think the subtext was that if you give the money away you won’t have it anymore, and that is a bad thing, but the authors also went on at length about the crippling effects of unearned money.

On the other hand, Wealth Matters seems to be swimming against the popular personal financial wisdom tide. Don’t rich parents habitually pass on the secrets of the ways of money to their offspring? And how can it be that there are consultants to help the rich deal with money issues like these? Didn’t they get rich because they are skilled at such things?

When I was growing up I knew a kid who worked every summer in high school, doing the sort of just-above-minimum-wage jobs you’d expect an earnest teenager to do. Most the rest of us weren’t so earnest. One day this guy mentioned how annoying it was that he got to keep less than half of what he earned.

It hadn’t really occurred to me until he brought it up, but this kid’s family was quite rich. He had a trust fund that put him into the top tax bracket, which in those days was north of 50%. Nevertheless, his parents made him go out and get a job every summer, because it was the right thing to do.

When I was young I thought this was an example of great parenting. Now I am not so sure. Granted, my kids are in absolutely no danger of not having to work for a living as adults, so for me this is merely an academic question. (As it is, I suspect, for just about all readers of the Wealth Matters column.)

Idealistic notions of work as personal fulfillment aside, just about everybody works for the money. Some of us may not be making as much as we possibly could, preferring to do something a little more pleasant or fun than the income-maximizing job, but I don’t know anybody who would keep doing what they do if they weren’t paid to do it, even if they didn’t need the money.

Is training your children to believe that working every day is the right thing to do, even if you don’t need to, a good idea? I’m not so sure. Raising them to think that work is not about money seems like begging them to make poor career choices later on. And teaching them that they never need to worry about money when, like just about everybody else, they most certainly do, is a disaster waiting to happen.

Like most parenting issues, my take on this is to avoid over-thinking it. Money and work are what they are. With age-appropriate details, I plan to tell my kids the facts as I know them. Here’s where the money comes from, there’s where it goes. If you want to live well, expect to work hard. They’re bright kids. They’ll figure it out.

[Photo William Helsen]

Media | Frank Curmudgeon | July 27, 2009 12:30 pm

No Comments

By Dave C., July 27, 2009 @ 12:52 pm

I imagine the tough part is trying to explain to the children (in rich families) why they can’t have whatever they want when the resources to obtain it are plainly available. I suppose this type of argument could arise if the parents are flippant about spending money, but then reign in allowances to their children.

Frank, how do you feel about the paying kids for doing chores, or giving them a set allowance and providing the option to save (and collect interest). Do you think these methods foster a sense of responsibility?

I’m asking because I don’t have any children and often wonder how some parents approach this issue.
By Rob Bennett, July 27, 2009 @ 1:18 pm

Money and work are what they are.

But what are they?

It is my sense that the rules of the game are changing.

That’s always been so, of course. But we go for long periods of time where the rules seem stable enough that we can act as if they are stable. And then the changes that we have ignored catch up to us and we are thrown into a crisis.

If we then face up to the new questions presented to us, we go on to even greater things and richer live. If not….

Rob
By Regular contributor, anonymous for this, July 27, 2009 @ 3:44 pm

I have alot of respect for your anecdotal rich family.

And I think you made a completely false inference about their philosophy when you wrote “Raising them to think that work is not about money seems like begging them to make poor career choices later on.” Nothing could be a more polar opposite from the truth, imho.

I doubt their message to the kid was that work is not about money, but rather life is most fulfilling when you make your own way.

If there is one aspect of personal finance that I struggle with, in philosophy, this is it. My wife and I were both children of middle/upper middle class government employees on their way to becoming the millionaires next door. And both sets of parents have been successful at this; the in-laws particularly by starting a business (during the time we were dating) that has pushed them somewhere around the $10 million net worth mark or so (and rising fast). My parents are less so, but with a great pension, lucrative private sector second career, multiple mortgage free houses, and comfortable savings, they’re in the lower end of the multi-millionaire range.

My wife and I are on track to hitting the $1M in investable assets when I’m about 40 (well before our parents, even adjusting for inflation), at which point there will be no mortgage, so with a continued high salary (very stable industry), we’ll be passing that mark at a very high rate.

Frank, the only times I’ve really disagreed with your columns, and I’ve read all of them, are when you criticize the “Millionaire Next Door” philosophy. Because that book describes our family, and our extended family to a tee. (a sibling has a $300k income, drives a 12 year old Camry).

I plan on talking extensively with my kids about money as they mature (the oldest is only a toddler now), and I plan on being completely honest with them about how much we have, how much their family has, how fortunate we all are, but how to a certain degree we also make our own fortune. I think it’s a mistake to try to hide money, or pretend we can’t afford something. But that doesn’t mean they get whatever they want. I’ll explain why we do about 80% of our grocery shopping at Super Wal-Mart (20% at Whole Foods, when it makes a difference), why we drive cars into the ground, clean our own house, etc.

Overall though, I just worry that it will be different for them in a negative way. They’ll think all grandparents must have weekend beach houses.

I don’t worry too much about it, of course, because I’m confident that my plan of full disclosure, plus plenty of role modeling habits about frugal consumption and anti-debt are the best for us.

Obviously they’ll know that they always have something to fall back on in a true emergency, and when I say true emergency, I’m talking cancer, not “I’m not satisfied at my job, I want to live at home for free so I can buy more clothes.” I wholeheartedly believe that happiness comes from the satisfaction of making your own way. (My parents haven’t given us money. I did receive some inheritance, less than six figures, a few years ago from grandparents, and that figure added about 25% to our house down payment–no crazy spending as a result of it). Other than that, we’ve earned everything.

There’s alot of rambling in this disorganized post of mine for which I apologize. But Frank, this is one area where I think you’re way off.

Of course, we agree that the whole paid financial coach for kids thing is stupid–there’s no way that person knows more than me about the things I want my kids to learn. For others with inherited wealth, maybe it’s not a bad idea.
By Kosmo @ The Casual Observer, July 27, 2009 @ 4:30 pm

Having the kid get a job might actually be a negative impact on society – because they’re taking a job away from someone who might be able to (help) feed their kids with the wages.

Do you really want A-Rod’s kid and your kid (or you) applying for the same job at the sporting goods store?

Maybe, instead, steer the kid toward volunteer work and philanthropy.
By bex, July 27, 2009 @ 6:07 pm

Kosmo has a good point… but it can be problematic.

Speaking as somebody who has worked for charities — and has 3 relatives who did the same — a lot of these places are chocked full of rich people with no managerial skills. Its pretty much a hobby for them, and their sense of entitlement can really bring down the folks who are there because they are really passionate.

I like the idea of pushing them into volunteer work, but they should also learn other skills… otherwise, eventually they will be an even WORSE drain on the economy than they were as teenagers.
By Holly, July 27, 2009 @ 8:37 pm

Funny how some people with next-to-nothing teach their children to have this grandiose (and unsustainable) sense of self-worth (i.e. lavish princess parties for the girls complete w/limos and sports arena box-seat parties for the boys), while ‘real’ rich people are driving in their kids in the old jalopy to the farmer’s market; there is so much irony here…
By hickchick, July 28, 2009 @ 12:18 am

Maybe it’s not about money at all. My first job was more about financial freedom, learning a little responsibility, and learning to have patience (and respect) for my fellow man.

I found out exactly what it’s like to pay for my own things. In addition to the pride of owning something you worked for, there’s the realization that this object cost X hours of time at a crappy job. I also learned that a patient smile is sometimes the best gift you can give someone. Those are things you can’t really understand until you have been in that situation.
By Frank Curmudgeon, July 28, 2009 @ 11:05 am

Temporarily Anonymous: I’m not sure that we disagree on much. I’m very uncomfortable with the idea of using smoke and mirrors to construct a false economic environment for children. Raising them to think that the family is poorer than it really is is certainly better than raising them to think it is richer than reality, but both strike me as dangerous. If Mom and Dad drive old cars even though they could afford shiny new ones, the kids will notice and learn appropriate lessons. You don’t need to convince them the cars are old because there is no other choice.
By hoping to be rich, July 31, 2009 @ 3:28 pm

Temp Annonymous: You don’t have to pretend to your kids you can’t afford something to say they can’t have it. Even if you can easily afford it. You should explain that it’s better to save that money for investing or savings rather than buying that 50th pair of shoes. Most people can afford a pair of shoes but they would rather havt that 50th pair than think of the future aspect of that money. Of course, this doesn’t stop at shoes. Now you need that blouse, another pair of jeans, another accessory. It all adds up. In the end all you have is more crap. Just teach your kids to be happy with a few of each items. That alone will go a long long way in helping them save. If you as a parent are always getting bored with what you have and go get more, chances are your kids will too. I don’t watch that much tv. As a result my kids don’t. I don’t eat alot of crap, as a result my kids don’t. I try really hard to not get extra crap (a little judgement needed here I suppose), and as a result my kids don’t expect to have 10 of everything. Get the picture?
By hoping to be rich, July 31, 2009 @ 3:42 pm

Another thought. If your rich, instead of steering your kids to volunteer work or a career they may or may not like, teach them to learn about money management. If you are rich, sooner or later, no matter what career your kids chose, they’ll think, “Screw this job, I’m out of here” and quit because they know they can. But what’s lacking now is the ability to manage the money they have. It’s one thing for you to have built it and managed it well. But if your kids don’t know much about money management, even if they are hard workers, they may risk that money. At the very least they should get in the habit of learning about money management. If you’re rich, after dividing it among your 3 or 4 kids, they obviously won’t be able to sustain the same lifestyle you did, they’ll have 1/4 of what you did. And don’t forget inflation. Even 1 child who gets everything you had, inflation will erode that value if they don’t know about money management to make it grow.
By wondering, August 9, 2009 @ 1:01 pm

Living within your means. Learning to manage the money you have. Doesn’t matter what you have millions or little. Those are the skills to be taught. Most importanly learn to enjoy what you have. Nothing more is necessary.
By wondering, August 9, 2009 @ 1:04 pm

enjoying something you can not afford we all recognize as being foolish. Not enjoying what you can afford is miserly if not foolish.
By Patrick, August 24, 2009 @ 11:57 pm

One other way to look at the outlook of your rich friend’s parents is that they wanted him to know what it was like to be an employee before he inevitably became an employer.
By Young CPA, August 17, 2010 @ 10:14 pm

To Frank and hoping,

Temporarily anonymous (TA) did not say or imply he would deceive his children about their level of wealth. Actually TA said quite the opposite. Since when is spending money just because you have it a virtue? Why is driving an old car something to avoid? That’s ridiculous imho.

To TA – what your demonstrating for your kids ( and what their gparents are demonstrating) is priceless and worth far more than a trust fund.

Personally, I learned more about hard work and humility through my minimum wage jobs when I was younger than I have anywhere else. Everyone, rich offspring and poor alike, should be required to work a minimum wage job for a year as part of basic character development. It’s a tragedy that anyone thinks this is undesirable due to other people needing the employment. This is not what limits the availability of work for everyone ( basic common sense or a basic knowledge of economics will explain why that’s not true.) I’m not going to debate that here but telling people not to apply for a job in no way solves any problem that needs to be addressed if there are not enough paying jobs for everyone. Having said that, I think that it is important to teach teenagers with new jobs the moral value of setting aside part of your income and willingly giving it away to those less fortunate.
By Goodd ( :, August 24, 2010 @ 5:23 pm

Blahh !
By priceless, November 26, 2012 @ 4:08 pm

i want to be rich and wealthy
By priceless, November 26, 2012 @ 4:10 pm

they have nice houses and iam very happy for them.
By bank loans for bad credit unsecured loans, April 22, 2013 @ 9:43 pm

Ridiculous tale there. What occurred after? Thanks!
By Janine, June 20, 2013 @ 10:13 pm

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