The fourth of a four-part blog about the implications of overnight wealth.
We’ve all read about it, the insidious effects of overnight prosperity. Wealth can be liberating and fun, but it’s divisive, too. It creates barriers, particularly social ones, that can lead to life-altering levels of isolation.
Our children, those in our family we care and worry about the most, are especially vulnerable to the consequences of sudden wealth. There’s even a word for it: Affluenza – a condition that comes from being surrounded by too much money, and it can affect them very negatively.
This is the fourth of my blogs about the impact of overnight wealth and, despite the overwhelming scholarly, therapeutic and anecdotal evidence that the results of sudden wealth are usually more negative than positive (especially on children) I have located a source of good news.
Silver Spoon Kids
In their book Silver Spoon Kids: How Successful Parents Raise Responsible Children, authors Eileen Gallo, P.H.D. and Jon Gallo, J.D., offer some important clues about the do’s and don’ts surrounding a formidable issue. It comes down to three things:
- Encourage your children to live your values, especially those you lived by before you hit the jackpot.
- Teach your children about money through word and deed. Be responsible role models, in other words.
- Raise givers not getters.
One insight from this that especially resonated with me was the following:
People have not been educated to raise children in an affluent society. Part of the problem is that many parents are first generation affluents. They grew up in households where money was scarce. As a result, they lack adequate models for their parenting attitudes and actions.
Children of privilege
There is growing evidence that children of the affluent are becoming “increasingly troubled, reckless and self-destructive,” wrote Suniya Luthar, a professor of psychology at Arizona State University along with Barry Schwartz, professor of psychology at Swarthmore College, in a blog post for Reuters titled “Sometimes ‘poor little rich kids’ are really poor little rich kids.”
Luthar has been studying the lives of privileged children for 25 years. Her research has shown that drug and alcohol use among affluent teens is higher than among kids of the same age group in inner cities. Further, children growing up in wealthier households are more likely to be suffering from anxiety and depression compared with the national average, according to the research. And, while crime is believed to be more of an issue for children living in poverty, there are “comparable levels of delinquency” for children in lower-income and upper-income households, wrote Luthar and Schwartz.
Money is plentiful, so children have more money to buy drugs and alcohol and get sophisticated fake IDs, and parents have the money to pay for high-profile lawyers to make sure their children continue to have an “absolutely pristine record,” she said.
“We are certainly not saying that all affluent parents do this, or even that most do. But there is a sizable and vocal minority of parents who do not just bail their kids out but do it repeatedly and do it in very inappropriate circumstances,” said Luthar, who is also professor emerita at Columbia University’s Teachers College. “So these are the kids who then start to believe, and rightfully so, I’m not getting caught and even if I do, nothing’s going to happen to me.”
Modeling is a key issue in all households, including wealthy ones, psychologists say.
“You are literally displaying a behavior and then younger people who are more prone to being influenced by things see it and there’s a sense of entitlement by some people with money, not all people, and there’s also a sense that you’re not being corrected if you’re getting away with things,” said Harris Stratyner, a Manhattan psychologist who works primarily with wealthy families.
Children do what they see, psychologists say, and that plays a big role in the kinds of values you instill in your children. “Are you walking in the house with four pairs of Jimmy Choos?” writes Gallo. “You have to look at your own values.” Added Luthar, “If you’re the kind of person who stops at a traffic light to let an elderly person pass or picks up food for them in the supermarket, they watch this from when they are babies.”
Follow the example of Warren Buffett
Perhaps there is no greater positive example of children modeling the values of their wealthy parents than the Buffett family, with the father, Warren Buffett of Berkshire Hathaway, one of the wealthiest people on the planet. And yet, his kids grew up never thinking they were wealthy. Buffett’s youngest son Peter, who is now 57, said he didn’t actually realize his father had amassed so much wealth until he was 25.
In a quote widely repeated when it comes to raising children with wealth, Buffett, the father, has said that he wanted to give his kids “enough so that they could feel that they could do anything, but not so much that they could do nothing.”
Geoff Funke, Senior Wealth Advisor, Scotia Wealth Management, 604.535.4721.