How the super-wealthy can avoid spoiling their children

Nepo babies are in the spotlight, but can the rich and famous put them on the right path, asks Fran Ivens

Brooklyn Peltz Beckham, the famous son of even more famous David and Victoria Beckham, and wealthy husband of even wealthier Nicola Peltz Beckham, is the perfect case study of a nepo baby ( ie someone who has benefited from famous or powerful parents to get ahead).

The 24-year-old already has a raft of high-profile accomplishments to his name: photographer, social media chef and model – but nothing seems to have stuck despite having opportunities unimaginable to most of us.

So how can wealthy parents avoid their children becoming spoilt or entitled? “It is certainly something clients talk to us about and ask for advice on,” says Alexandra Loydon, of wealth manager St James’s Place.

BE TRANSPARENT

Being upfront about wealth is a good place to start. Jane Sydenham, of investment manager Rathbones, says that hiding wealth from children and only telling them about their privilege when they are older can lead to the child “losing it slightly”.

“It is better that children gradually realise they come from a privileged background, otherwise all of a sudden their frame of reference for decision- making has been knocked out completely by the surprise of a financial benefit they had no idea they had,” she adds. Once they are old enough, bringing them into conversations with financial advisers can be an effective way for them to learn about money and how it is managed. Parents may also teach children they will become the custodian of wealth for others.

It also enforces the message that money isn’t necessarily permanent; it must be earned and can be lost. Encouraging children to get a Saturday job is one way for them to learn to appreciate money. For example, if a family decides they don’t want to burden their children with student debt and opt to pay university fees directly, they could say that they need to get a part-time job at the same time as studying or in the holidays to help with their spending.

GET THEM INVOLVED IN CHARITY While actions are, of course, important, how parents and families discuss money will also have an impact on children. Explaining that as a family you have more than others, and providing opportunities for children to share what they have, can demonstrate how wealth can be used to help others.

“Some families use philanthropy as a tool; for example, setting up a charitable trust and allowing the children to be decision- makers,” says Loydon. “For example, children might turn around and say ‘ I want to save elephants’ and parents will say, ‘ Let’s find some charities and you pitch your favourite one.’ It can also be a good way to learn about investment if the money is being placed into a managed charitable vehicle.”

For younger children, smaller direct acts of charity can be a good place to start. This may mean encouraging them to contribute to a school bake sale and explaining the purpose of their efforts, or running a fundraising event of their own to empower them with the idea that they can have an impact.

“At Christmas time, one of my clients takes the whole family to serve food to homeless people. It enabled them to go ‘ Look how lucky you are that you can help other people too’,” says Sydenham.

It also may plant a sense of purpose to help ground children or young people who may feel adrift knowing they will always have a financial safety net.

HELP THEM TO BE INDEPENDENT There is a related question of how you prevent your child becoming entitled and happy to rely on their family wealth rather than making their own way.

Sydenham warns that just because parents have become successful in their own right, it doesn’t mean they will necessarily instil the same work ethic in their children. Some youngsters may feel that as they are unlikely to become as successful as their parents, there is little point in branching out.

“One of the things that brings us happiness is mastery, following our dreams and passions,” says parenting coach Zoe Field. “It is harder for wealthy parents because they can give their kids so much. But maybe they are not setting their child up to be independent.”

One approach is parents telling their children that at the end of their formal education – after university – they are on their own. The private education and support they receive up until that point is essentially their inheritance.

For others, it may go as far as providing a deposit to help get on to the property ladder and then cutting them off, leaving them to go it alone. “You may not always support your children with money. But you can say, ‘ This is what we are planning to provide... and then after that we think it is important for you to learn how to look after yourself and empower yourself,’” suggests Field.

Parenting coach Axelle Advani similarly suggests a middle ground where parents don’t deny their children a financial safety net, but instead encourage them to use it to explore the career or impact they want to pursue. She says to look at Bill Gates. The billionaire is reportedly only leaving his children $10m each, and donating the rest to the Gates Foundation, a fund focused on healthcare and poverty eradication.

Field agrees, adding that reinforcing the message to children that they are capable of earning their own money and empowering them by outlining what you will provide could be a more balanced approach.

“Everybody wants to do something for themselves because that is human nature,” says Advani. “Parents shouldn’t worry as much because it is natural to want to go out and make your own way.”

However, she adds, there is also a line to walk to ensure you do not promote attaining wealth at the expense of other important parts of life such as relationships and interests outside of work.

“It’s essential to avoid thinking in black- and- white terms,” she says. “Embracing a nuanced perspective allows for a healthier and more sustainable approach to personal and professional endeavours.”