Some children are born with a hand in the cookie jar
Alocal fiction writer was doing a reading at the college one evening a couple of years ago. It was a story about a wilderness journey for an adventurous young woman. Since the author was also a friend of a friend, we were all very excited to attend as a family. Arriving early, we took up several of the better seats in the centre of the small lecture theatre. And that’s when we noticed the cookies. Stacks of them. Huge ones.
The event was shortly after the dinner hour, and apparently none of the other 50 to 60 in attendance were hungry. I also noted that no other children were in the crowd and interpreted that in terms of cookies per capita.
Just as I arrived at the cookie table and started loading up, the signal was given for the start of the event, so I clumsily grabbed enough for our family – two each. It’s a big family and thus it was an unwieldy armload of goods.
I squeezed past my girls and distributed the loot to them, sitting down, just as the author introduced herself.
She set the stage for the opening scene of the novel. A stunningly beautiful river. A backwoods canoe ride. Then came a warning about sexual content. My wife glanced at me with that “you’re dead” look.
I shrugged it off and took a bite of my cookie as the storyteller waded into the opening sex scene rather abruptly. My daughters looked like they had all been thwacked in the head with a dead seagull. Flushed cheeks, big eyes.
My wife was glowing red. I took another bite of my cookie, certain that the main character would soon realize that she was Catholic, but as the description continued to unfold, I too started to sweat a bit.
Gagging on my cookie, a minute later we were all balancing stolen baked goods in our hands, and “excuse-me-ing” through the tight row of seats. All eyes were on us, including the author’s, who paused briefly and almost, but not quite asked for her cookies back.
A moment later we had escaped from lecture hall along with our baked goods. A nice outcome really. Saved from an awkward moment of explicit dialogue, our cookies still in-hand.
Depending on how you write your will, children of successful investors will probably get all the cookies they’ll ever need and more.
Here are a few points to consider so the children of financially-successful parents get some of the lessons of life, without too much baked-in privilege.
Raise financially responsible children
Most people who have built a relatively high level of wealth have done so through hard work, either as a business owner, executive or professional. Many are concerned that their children won’t recognize the value of all that work.
A solid financial education is a key part of every child’s successful future. The best way to protect your children from “affluenza” is to prevent it in the first place.
Give children a reasonable allowance
An allowance to your children can provide much more than a pool of spending money.
You can use an allowance to teach money management skills to your children. For example, your 12-year-old might get $12 per week ($1 per week for each year of age can be a starting point), but with strings attached from the get-go, similar to the following:
• Save one-third. Introducing the concept of “paying yourself first” at a young age will help kids manage expectations and recognize the value of saving for the future. Also consider having your children read well-known and easy-to-read financial planning books.
• Spend one-third. Figuring out how to stretch this amount will develop valuable budgeting skills. Let them buy some of their own clothes and supplies with the funds.
• Share one-third with charitable causes. Children will develop a social conscience as they decide which organizations and causes to support.
This system is flexible enough to work for kids of all ages and can be easily modified to suit your family’s specific objectives.
Set limits
Parents with above-average financial resources aren’t able to say “no” with that old parental standby: “We can’t afford it.”
But they still need to teach the lesson that we don’t always get what we want. One solution is to sit down as a family and draw up a monthly or semi-annual budget that accommodates reasonable activities and purchases for everyone in the family.
When the kids invariably ask for something that’s not part of the plan, you’ll have an ironclad answer: “No, that’s not in the budget. But maybe we can include it next time.”
Explain the numbers
When children start earning income, they should understand how to read their pay slips and bank statements. You can also consider having them take part in preparing their own income tax returns.
What if it’s too late?
If you feel like your children are already too spoiled, or if you have concerns about their choice of partners, or potential creditors, then you may wish to explore a testamentary trust.
Triggered at the death of the second parent, this tool can manage the dispersion of wealth according to your reasonable wishes.
Mark Ryan is an investment advisor with RBC Dominion Securities Inc. (Member – Canadian Investor Protection Fund), and these are Ryan’s views, and not those of RBC Dominion Securities. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. See his website at: http://dir.rbcinvestments.com/mark.ryan.