StonebridgeFOCUS | Financial Role Modeling

Did you know that twins have a higher rate of left-handedness? About 22% are southpaws compared to only 10% of singletons. Also, about 40% of twins develop their own language to communicate with one another. My wife and I are only weeks away from welcoming our twin boys into the world, and despite how close we are to the due date, the reality hasn’t really set in. I haven’t really thought much about their future interests, passions, or even what they will look like. I think about how I am going to prepare them for a world that no one can fully understand, or for a world that will be very different than today. I think about statistics and numbers, like cost of daycare, cost of college, and family wealth transfers. Approximately 90% of wealth doesn’t survive three generationsⁱ. As the saying goes, “shirtsleeves to shirtsleeves.”

As humans responsible for other tiny humans, we all want what is best for our kids and for them to live their best lives. Perhaps one of the biggest struggles is knowing what to teach them and when. It’s not like parents take a monthly or annual inventory of life skills their kids have accumulated. It’s 18 years (sometimes more) of controlled chaos. I can speak authoritatively on the subject based on my 2 years of parenting experience (sarcasm intended).

90% of students say they learned everything they know about money from their parents. 87% of parents believe their children learn everything they need to know about money at schoolⁱⁱ. Do you see the disconnect here? Most believe the biggest hurdle to multi-generational wealth has to do with oppressive taxes or legal issues. While those do matter, the greatest impediment to successful wealth transfers is a breakdown of communication and trust within the family unit, including heirs being inadequately prepared (accounts for 85% of failed wealth transfers)ⁱ.

The hard truth that most aren’t willing to admit is that many of the lessons you’ve learned in life came from the School of Hard Knocks, and it’s difficult to teach something if you don’t know how you learned it. Most parents may be embarrassed to admit they don’t know how to teach their kids financial fundamentals, but building a healthy relationship around money leads to greater independence, entrepreneurialism, and higher probability of preserving multigenerational wealth.

Cornelius Vanderbilt, one of the wealthiest Americans who ever lived, built a vast fortune by monopolizing the shipping and railroad industries. When he died in 1877, he left his $100 million fortune to his oldest son, who managed to double the family wealth. In 1973, 120 Vanderbilt heirs attended the 100-year reunion at Vanderbilt University. Not even one was a millionaire.

Despite their vast wealth, the Vanderbilt family was not immune to the three-generation statistic.

Financial literacy and competency begin with a healthy understanding of how to earn money, save it, spend it, invest it, and share it. It also means avoiding mistakes that could hinder your child’s growth. A common financial faux pas is parents shielding their kids from how much stuff costs, which makes it difficult to learn the value of a dollar.

Another common mistake is intervening when kids are earning and saving for something they want. It’s hard to watch kids going through the angst of waiting to achieve a specific savings goal. While it may be easier to whip out your credit card to buy the item, let them receive the sense of empowerment and independence earned when they achieve that goal themselves.

As the world starts to slow down and families reunite over the holiday season, what better time to start thinking about your own financial role modeling, and the impact you can have on your child’s life. Over the next few months, we’ll share some ideas and resources on how to help build a strong financial foundation for your kids, no matter their age. Each part will emphasize various age groups (under 12, teenagers, and adult children). The important thing to remember is that it is never too late to start.

Andrew Carnegie, another historically wealthy American by his own right, said, “even a fool can make a million dollars. But it takes a sage to keep it.” While we work hard to provide for our family’s current and future needs, we often think too much about what stuff we give them instead of skills or values we can impart.

We look forward to sharing more about family governance and how we support you and your family in building multi-generational wealth. If you’d like to learn more, please This email address is being protected from spambots. You need JavaScript enabled to view it.a copy of our family governance information guide. Thank you for your continued trust and confidence in Stonebridge.

 Regards,

Tyler Martin, CFP®, CPWA®

ⁱSource: Research study by Roy Williams and Vic Preisser, The Williams Group, 2002, as cited in Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, Roy Williams and Vic Preisser, 2011.

ⁱⁱSource: JumpStart Coalition for Personal Financial Literacy, 2011.