I knew Jane Austen. Jane Austen was a friend of mine. She told me that it’s a truth universally acknowledged that an individual in possession of a good fortune should read this book. And, I say that if the book delivers on its subtitle, “Ensuring a Responsible Financial Future for the Next Generation,” it could put to rest Confucius’ (or was it Yogi Berra’s?) maxim, “From rice paddy to rice paddy in three generations.”
The “kids” in the title range from kindergardeners through young adults. Although this book is aimed at parents who are high-net-worth individuals (formerly called “rich” or “wealthy”), the advice on imparting values, financial literacy, money management skills, setting life goals and differentiating between wants and needs, should also be of interest to parents who are merely comfortable. What is “comfortable?” A pedestrian gets hit by a car. An ambulance is on the way. A good samaritan rolls up his jacket and puts it under the victim’s head. “Are you comfortable?” he asks. Response: “I make a living.”
In their book, Richard A Morris1 and Jayne A. Pearl2 quote many respected advisors—including Tom Rogerson, director of Bank of New York Mellon’s Family Wealth Services in Boston. Rogerson tells wealthy clients that tax minimization planning has much less effect on the well-being of the next generation than integrating family values with wealth planning.
Traditional planning is failing, says Rogerson, and he gives his family as an example. His great-grandfather, Charles Rogerson, was very wealthy—he owned and operated a large investment trust company in the Boston area and started the Boston Foundation, the third oldest community foundation in the United States. Rogerson says: “Although his great grandfather’s estate plan was designed to get the bulk of his money down to the family, it’s gone, I’m sorry to say. His son was one of the best estate planning attorneys in Boston. I don’t think you can estate-plan or tax-plan your way out of this problem, which is news to a lot of wealthy people.”
• The first three chapters cover spending, estate planning and portfolio management. These are “somewhat technical concepts,” the authors say, and “if you are not a numbers person, you may prefer to skim the first chapters or even skip them.” The balance of the book, they say, “deals with the softer topics.” And, that’s what differentiates this book from myriad others on estate and financial planning.
• Parents are guided through instilling financial values in children—teaching them to tolerate delayed gratification, to practice making tradeoffs and when to tell oneself “no.”
• Specific issues that arise in wealthy families are addressed—for example, will allowances work for kids of wealthy parents? Should the teenagers get a summer or after-school job? How can parents
prepare children to invest and develop healthy spending and saving patterns.
• The authors also discuss how a family private foundation can provide children with a sense of social responsibility and decision making.
It’s said that half of all marriages end in divorce. So, the authors give this advice to wealthy parents: The time to bring up the topic of prenuptial agreements is before your child becomes involved in a serious relationship so he doesn’t believe you dislike or distrust the romantic partner. It’s best to discuss prenups with your children as soon as when they’re in their early teens. You might want to wait for the subject of money or wealth or someone’s recent marriage or divorce to come up to mention that, in families with some degree of wealth, it’s necessary to tell an intended spouse that it’s the family’s custom to have a prenup.
If half of all marriages end in divorce, how does the other half end? They end in death. I ask you, which is worse?
Take away: This book is a road map for trustafarians to live a life of personal, family and career fulfillment—and to be socially responsible members of the community. Not a bad trip.
1. Richard A. Morris has a marketing and education background. The sale of his family’s auto parts manufacturing company was a “liquidity event” that prompted him to rethink his life. Even though he and his wife decided not to change their standard of living substantially, he says that they found that the liquidity of their assets provided new challenges in bringing up their children, as well as managing the families’ finances.
2. Co-author Jayne A. Pearl has been a financial journalist since 1980. She started as a reporter-researcher at Forbes magazine, where she helped research and fact-check the Forbes 400 “Rich List” of the wealthiest Americans. In 1989, she helped launch Family Business magazine, to which she has contributed for over 20 years. She’s the author of Kids and Money: Giving Them the Savvy to Succeed Financially.