Most of today’s millionaires understand the hard work and skilled investing that goes into building a sizable fortune. After all, wealth doesn’t accumulate overnight. However, one of the biggest concerns of affluent families is whether or not their children will share the same sentiments.
On one hand, these rich people cannot let go off their wealth, and on the other, they need to raise their kids within the social and financial strata that they currently belong to. In a recent journal published by the USDA, the cost of raising a child, among many other factors, largely depend upon the economic conditions of the family.
Raising spoiled children is a fear of many wealthy individuals, but there are ways to avoid this. By sharing your values about money and protecting your assets using smart financial tools, you can help instill the right attitude about wealth into your heirs.
Estate planning should be considered
As is the case with most affluent individuals, you probably want to share the benefits of your wealth with your children as they grow up, especially if you were self-made and didn’t have the luxury of wealth as a child. This is perfectly reasonable—vacations, nice things, and a comfortable lifestyle are all normal gifts to want to give your kids.
However, it’s important to teach your children about money from an early age so they do not grow up assuming that wealth is a given. Most affluent people get to where they are through attention, skill, and effort, but if all your kids know is that money is available whenever they want it, those values are less likely to be passed along to them.
Encourage your children to save, to learn the value of a dollar, and to appreciate their privileges as they age so that they’re ready to build their own financial success when they are older—not feeling entitled to a large inheritance that will last them the rest of their lives.
How to teach money management to students?
Money is “priceless”. Your kids need to learn this from you at a preferably early age. And you certainly would not want life and its hurdles to teach this lesson to your kid. You’d better handle it yourself, with care!
Did you know that you could even start those lessons with your toddlers? Yes, preschoolers can be roped into the habit of saving. Replace that colorful piggy bank with a transparent jar – the child would actually see the dollar bills growing in volume!
Setting an example, is the best way to instill values in your children. Show them a time when you or your spouse have restrained yourself from buying a costly stuff. By the age of 7, children start grasping your ways.
“It’s also important, to be honest about your money from the beginning. Wealthy parents who leave a surprise fortune for their children may be saddened to discover that the child doesn’t know how to handle the newfound wealth and blows it immediately,” says Samuel Rad of Affluencer Financial.
Having discussions about savings, investments, and smart money management from an early age will prepare your family for financial success.
Best financial plan for the wealthy to raise their kids
Another key factor in all of this is inheritance. Many wealthy families feel obligated to pass their wealth onto their children—after all if you could give your kids the gift of an easier life, wouldn’t you? However, you must approach the topic of inheritance carefully if you’re concerned about spoiling your children.
With unrestricted access to your funds—especially at a younger age—will your children be smart with your wealth, or are you concerned that they will mismanage it? If it’s the latter, you may want to consider establishing trusts that dictate the terms of your children’s inheritances.
Many wealthy individuals use trusts to restrict their children’s access to assets until they are older—perhaps 30 years old, instead of 18. This simple action helps encourage your kids to be more self-sufficient and build their own income and values about money before inheriting a substantial sum. Trust terms could also include incentives to reach objectives that will set them up for success, like graduating college or landing their first job.
Other families opt to not give it all to their children, as well. Establishing trusts with smaller inheritances for your children and donating the rest to charity can help set them up for success while emphasizing good values and the spirit of giving and reminding your children to pursue their own paths and earn their satisfaction with the money of their own.
If you’re struggling with your options when it comes to trusts, contact the best financial advisor, and seek his/her financial advice. Your certified financial planner in Los Angeles can help you explore the ways you can set your children up for financial success without leading them down a path of spoiled mismanagement.
Children are an important part of all your financial, retirement, or estate planning. Plan carefully, such that it leaves a positive and encouraging message for them!