Eradicating Entitlement

Even families that don’t consider themselves highly affluent can be raising “trustafarians” without realizing it

Key Takeaways:

• Entitled people, especially children, don’t develop the capacity for self-reliance or independence.

• Even in families of modest affluence, it’s essential for kids to learn about spending wisely, saving diligently and sharing generously.

• Warren Buffet said, the perfect amount to leave your kids, is ''enough money so that they would feel they could do anything, but not so much that they could do nothing.'' 

The word “entitlement” has many negative connotations, but it wasn’t always that way. In the past, it was often about having a right, as in “I’m entitled to certain rights.” In reality, it’s a little bit of both. Many times successful parents become concerned about their childrens’ feelings of entitlement stemming from their family’s ritzy neighborhood, their high-end cars, their affluent school district or the expensive sleep away camp they attend.

Your children or grandchildren don’t have to be trust fund recipients (i.e. trustafarians) to exhibit signs of entitlement that can be difficult to shed in adulthood. We all want to do what’s best for our children. But, giving kids too many things at an early age can prevent them from developing self-reliance and independence as they get older.

Another danger of entitlement is that children become so self-absorbed (both personally and materially) that they have no what other people want or need, particularly those who are less fortunate.

As Warren Buffet famously said, the perfect amount to leave to your kids,  is ''enough money so that they would feel they could do anything, but not so much that they could do nothing.''

Real world example

One family I know, in which both parents are first generation Americans, created significant wealth for themselves. Their children enjoyed the fruits of that hard work. Naturally, the parents wanted provide their kids with more than their parents gave them --more experiences, more opportunities.

The parents were well intentioned, but even those good intentions can give the kids unrealistic expectations. For instance, both kids expected to receive a Mercedes upon graduating from high school—which they did--because that’s what many of their affluent peers received in their circles.

Despite their advantages, both kids started to act out, which teens of all backgrounds inevitably do. The boy even got in trouble with the law, but thanks to his family’s wealth, they were able to hire top attorneys to get the boy off the hook. Unfortunately, he was kept entirely out of the legal process so he never learned his lesson. Before long, he got in trouble again. The parents realized too late that their good intentions—to protect their child—preventing the boy from learning valuable life lessons about being accountable for his actions and suffering the consequences. It took him many, many years to get on the right track to responsible adulthood and caused his family significant pain.

Add inherited wealth to the list of addictions

The Latin root of the word addiction mean “is a slave to a master.” When people are addicted to something, say a drug or alcohol, they’re slaves to that master. In the same way, when heirs inherit wealth, they get used to the regular “hits” from their trust distribution “dealer.” They organize their lives around their family’s money flow, rather than forging their own path to adulthood and self-reliance.

So, how do parents prevent this from happening? Start with the process of “naming.” When we name something, we’re calling it out. To name something, we don’t want to clobber it in the head with a baseball bat and call it “entitlement.” Instead, families that succeed and create family harmony, unity and cohesiveness over the generations are ones that have meaningful conversations about what they have. They discuss the potential risks of their wealth also the potential benefits it can provide to themselves and to others. In many ways, wealth and money can be viewed as members of the family—and we always have to respect our relationship with those special family members.

The Thee S’s

In a family of affluence, it’s important for the kids to learn about Spending, Saving and Sharing. This can begin as early as age five or six. I know of a family in which the father gave a dime to his daughter when she was 7 or 8 years old and he said, “We have a lot of these dimes. And so what I want to do is give you this dime, and we’re going to decide how we’ll spend it, how we’ll save it and how we’ll share it.” That was the beginning of the daughter’s wealth and money education.

I often facilitate family meetings around the qualitative or emotional issues that accompany wealthy families. A three-generation family business had multiple liquidity events over a short amount of time. That was very new to them, and subsequently what they decided to do in addition to getting technical advisors to help them, they brought in a family counselor to help them have meaningful and respectful conversations about what they have and what they want do with it.

Conclusion

For children of privilege, wealth can be a tremendous tool for helping others and for achieving a life of fulfillment. It can also be a dangerous and highly addictive drug. It’s never too early to teach your children and grandchildren about the 3 S’s and the responsibility of money. Contact me any time if you have concerns about your gifting or estate planning.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

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