If you’re rich, will your kids stay rich?
Different countries have different ways of expressing the same beliefs about wealth: “Shirtsleeves to shirtsleeves in three generations” is the one I most often hear. In Japan, it’s “Rice paddies to rice paddies in three generations”. In China, “Wealth never survives three generations.” In fact, for 70% of all wealthy families, the money has been spent, or otherwise lost before the end of the second generation.
People who have enough money to consider themselves, ‘rich” – those with at least $10 million — worry about their kids squandering the money they’re given or inherited.
According to a study by U.S. Trust, 75% of families worth over $5 million made it on their own. In other words, they built it, mostly by starting a successful business.
Unfortunately, that doesn’t mean that their kids are equally smart or hardworking. And it doesn’t mean that their parents are wise investors.
That means there’s a market out there for advisors who can teach the kids (and often the parents) the ins and outs of investing. This provides these families with the means to keep the wealth they have earned and keep it for the next generation, and the next after that.
But just as important is passing on the social, intellectual and spiritual capital that created the wealth in the first place. Too often the children of wealthy families fail to appreciate the work and sacrifice it took to create that wealth, and assume it will always be there for them.
At Korving & Company often serve several generations of the same family. If you have concerns about your children’s ability to manage money, call us for a consultation.