How Families Build Generational Wealth
Let’s start by saying wealth is not simply financial. Family wealth is a beautiful, colorful tapestry of values, stories, customs, and beliefs passed down through generations. The financial aspect comes into play and either weaves additional structure and substance into the existing tapestry or it tears the fabric of a family apart. Here are some tips to have the financial component compliment your integrative family wealth objectives.
Discussions around money – especially with family, can be emotional. The negative emotions of fear, anger, frustration, regret, and control can derail family financial dynamics. There are also positive emotions around money – gratitude, hope, energy, optimism, or happiness that can be supportive in creating financial health. Sometimes, it is best to set the “emotions” aside when it comes to financial discussions.
There are three components of healthy family dynamics around money:
- Ongoing, open Communication. Families who talk about money with spouses, parents and children are less stressed and will be more likely to build wealth. This may be sharing family stories about money memories or belief systems. Discussing goals, spending plans, opportunities, and challenges. Many times, families don’t talk because they believe that finances should be “private”. In a T. Rowe Price survey of Parents, Kids and Money, over 50% of parents don’t want to talk about money to their young children or adult kids. When you talk about money and model good financial habits, you expand opportunities for success – at any age.
- Defining Family Vision or creating a Financial Mission Statement. Have you discussed your “why” of having money – its purpose for provision, protection, and play? Have you considered how much is enough? I appreciate Warren Buffet’s perspective when he told Fortune in 1983 that would give his children “enough money so that they would feel they could do anything, but not so much that they could do nothing.”
- Education and Empowerment. Families who have seen their wealth build over generations put a big importance on educating the next generation. Financial literacy, from basic banking concepts to increasingly complex taxation and investment approaches, needs to be done at school and within our families. Empowering family members to step into their next financial best selves allows for mistakes and opportunities to learn from them. Financial education takes a village.
If we keep digging and want to communicate, create vision and educate ourselves and others we care about, it is important to understand the four areas of money that lead to chronic money conflict. Are you up for a challenge? Draw four horizontal lines on a piece of paper and have each person put their name somewhere on the continuum of 1 – 10.
- General Money Attitudes
- Are you more of a 1. Spender or a 10. Saver?
- Risk Tolerance with Money
- Do you want 1. Safety or do you seek 10. Opportunity?
- Communication Approach with Money
- Are you 1. Private or 10. Accessible?
- Considering the Financial Markets/Taxes/ Economic Season
- Do you get 1. Excited or feel 10. burdened?
This is not to pass judgement, or pigeonhole family members; but to open the opportunity to communicate more effectively as to how to accomplish your version of true prosperity. Stay curious about how these areas of potential conflict are showing up. You can possibly get some coaching or guidance in how to mitigate and manage these conflicts as you move forward with communication, creating a family mission statement or defining vision and educating yourselves and family members around all things financial.
We are the ancestors to future generations. What seeds are you planting today that you would like to see blossom perennially? We are all creating a legacy as part of our human experience. You get to decide whether it is intentional, positive, transformative, sustentative, and set for posterity.