Privilege - Proofing Your Family

This article was originally featured in Forbes.

At the holidays, it’s common to consider your good fortune and to express gratitude with acts of kindness and generosity. For entrepreneurs and wealth creators, the holidays are often a time when they feel the most generous, especially if they are first-generation wealth creators.

In researching our book, First Generation Wealth: Three Guiding Principles for Long-Lasting Wealth and an Enduring Family Legacy, my co-author and business partner, Adrian Cronje, and I were struck by what’s known as the shirtsleeves-to-shirtsleeves phenomenon, or the reality that most fortunes are made and lost within three generations.

Why does it happen, and how can you as a business owner guard against it? In doing so, can you imbue your family and your heirs with gratitude and generosity that extends beyond your family and into the world?

First-generation wealth creators have the chance to build the foundation for lasting wealth. Some of the most successful and fulfilled wealth creators (and those with the most high-functioning families) are those who take active measures to counteract entitlement among their families or heirs. Don’t underestimate the power of your own behaviors and actions to guide the next generation wisely.

Author and organizational consultant Dr. Dennis Jaffe has said his research keeps coming back “to one central point: 100-year families are better at communicating than other families.” We take Dr. Jaffe’s assertion one step further: You need to communicate and also model the behavior your family needs to see to sustain enduring wealth. No behavior is more important than gratitude—not just during the holidays, but throughout the year.

How To Lead By Example

Wealthy business owners are often mindful of keeping kids in the bubble of affluence. For example, if they attend private school where all the families—yours included—go to the tropics or go skiing on vacation, kids can easily lose sight that other people simply don’t have that kind of money. Or worse yet, they may think others don’t have the money because they are not as worthy. As harsh as it may sound, privilege can truly warp the mind if you aren’t careful.

As a successful business owner, you have the opportunity to get your kids outside the bubble, quite literally. You can do so by:

• Traveling the world. There is simply no substitute for the power of travel to impress upon young minds how vast, rich and different the world is beyond their own culture, privilege and material belongings. Take your family on big adventures that expose them to the huge variety of people, circumstances and experiences that exist outside your comfortable life at home.

It’s even better if these experiences are new to you as well. You will not only create a lifetime of shared memories, but you’ll have the chance to develop and model an openness that will serve your family into the future and inform the path your legacy will take.

• Normalize talking about privilege. Day-to-day conversations can have a lasting impact on kids. I have long made it a point to talk with my children about factors such as luck and why that should not be taken for granted.

Some people are born into tailwinds and others are not, and it’s important to consider the full circumstances of a person’s success or wealth or lack thereof. These conversations, combined with a well-developed worldview, can help your children better understand both their own good fortune and your point of view about it.

• Don’t shelter your kids from the realities of suffering. The pandemic has brought suffering home to families around the world. If you’re fortunate to have weathered it well, it’s important to help your children understand that there are other scenarios at play in the world.

Providing the next generation with a genuine and lasting perspective on how other people live, thrive and suffer can guard against the realities that too much comfort can manifest. Providing opportunities to volunteer and get hands-on with solving challenges in your community alongside your children can also expose them to the real world and empower them to know they can make a difference.

• Model thoughtful generosity. While not everyone has a strong charitable impulse, first-generation wealth creators are among the most generous philanthropists. At times, however, they may struggle to say no to organizations, friends and family members who come calling, either for a donation or for an investment in some private venture. A very successful founder of an NYSE-listed company told me years ago that figuring out how to give money away thoughtfully and purposefully was as difficult as making it.

An abundance of generosity can make it challenging to give and invest in a focused way that aligns with your interests and your vision for your legacy. Having a clear strategy and a vision for focusing your philanthropy can make your efforts all the more rewarding and impactful, and bringing your kids into those decisions—and those gifts—at an early age, and all throughout the year, will make them better partners and more thoughtful givers in the future.

The famously frugal wealth creator Warren Buffett said he wanted to give his children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” That mindset can serve you well as you think beyond money and about the experiences and behaviors your wealth allows you to develop, and the values you’ll impart to your children.

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