It may sound like a no-brainer, but you can’t expect your children to learn fiscal responsibility if you buy them whatever they want, whenever they want it. That’s a lesson best taught early. Even in preschool—and certainly by elementary school—you can begin teaching your kids about the difference between wants and needs, about making choices and trade-offs. Take Nixon Peabody CEO Andrew Glincher.
When his kids reached the age of 10, he‘d give them a choice when they went out to dinner. They could order a soda or water; if they chose the latter, they would get the money the drink would have cost. According to Glincher, they usually asked for water.
Similarly, when they were teenagers, he gave them a used car to share. When the vehicle was 10 years old, they asked for a newer model. “I told them you can sell this car and use the money to buy whatever you want,” he says. “The car was safe. It worked fine.” They decided to keep it.
Another way to teach fiscal smarts is by introducing your children to philanthropy, tailoring involvement to their age level. For example, when his children were young, Nuveen Investments CEO John Nersesian asked them to suggest charities for the family to support every six months. Now that they’re a little older, the kids also get involved with the organization. His daughter, a dog lover, not only donates to a pet shelter, but also volunteers there once a month.
“Even CEOs who may feel they haven’t paid enough attention to these matters can still step in and turn the situation around.”
Family foundations are another route. Anne Hargrave advises placing kids on a grant-making committee in their early teens to learn about reviewing applications and the award process. She points to an extended family that gathers for a big reunion annually. Among other activities, all the cousins, ranging in age from 6 to 14, team up to select a charity to support financially. Recently, the six-year-old persuaded the rest of the clan to adopt her cause, an organization working to save elephants.
Setting up trusts can also be useful, but only if you’re thoughtful about when the kids get access to the money. Lee Hausner, for example, urges parents not to let their children tap the funds until at least age 40, thereby giving them enough time to find their sea legs and define their lives without that wealth. She makes allowances for what she calls “trigger” events, during which you can loosen the purse strings, such as starting a business or paying tuition. A down payment on a house also fits the bill, as long as your child can afford the mortgage.
Another approach is to appoint a trusted advisor to be a co-trustee along with your child. The secret is finding someone who has a good relationship with your kid. Together, the two can discuss your child’s goals and devise long-term plans for how much money will be released and how that fits into those overall objectives.
Even CEOs who may feel they haven’t paid enough attention to these matters can still step in and turn the situation around. Two years ago, Todd Mitchem, CEO of Todd Mitchem Companies in Denver, started noticing signs that his middle-school-age son was acting spoiled—not just asking for a new bike, for example, but “a special type of bike and can I have it now?” he says. It was a wake-up call. So he and his wife decided to start the kids on an allowance, with which they could buy extras. If his son ran through the cash early, there would be no advances. Now, says Mitchem, “He’s talking about starting his own business because he wants to make more money.”