When former eBay-CEO-turned-gubernatorial-hopeful Meg Whitman came under fire in 2009 for not registering to vote until she was 46 years old, she conceded that her voting record was unacceptable, but blamed it at least partly on the demanding duties of parenting. “I was focused on raising a family, on my husband’s career, and we moved many, many times,” she said.
That may well have been true. But when it was later revealed that older son Griffith Rutherford Harsh V had gotten himself into major trouble in college, snarky bloggers questioned the fruits of Whitman’s child-rearing efforts. As a sophomore at Princeton in 2006, Griff was brought before the school’s disciplinary board after he was accused by a classmate of sexual assault. The alleged victim dropped the charges, saying she feared repercussions from crossing Griff’s family. That same year, Griff was arrested on battery charges after a brawl with another woman in a bar; Whitman posted her son’s $25,000 bail and the charges later were dropped. But Griff was eventually put on disciplinary probation, graduating a year later than expected, and he was reportedly banned from living on campus, a special irony given that the year before Griff was admitted, Whitman, a Princeton grad, and her neurosurgeon husband, a Rhodes Scholar from Harvard, donated $30 million to the school to build a 500-student housing complex named Whitman College. Whitman never commented publicly on Griff’s troubles, but his absence from the campaign trail may have been statement enough.
Though her parenting woes were made more public than most, Whitman is not alone in her struggle. All too often, the children of highly successful, self-made titans fail to inherit their parents’ initiative and strong work ethic. Despite starting life with all the advantages their parents never had, many underachieve, flunk out of school, can’t hold a job and while away their days on the ski slopes or sacked out on the couch playing video games. In the worst cases, they get involved with drugs or wind up clashing with the law. (Or both—last summer, “king of urban fashion” Tommy Hilfiger’s many-tattooed son, Richard, was arrested on one felony count of possession of marijuana with intent to sell.)
“It’s a natural tendency for parents to want to give their children what they think is a better life, but that oftentimes translates into an easier life,” says clinical psychologist Gary Buffone, author of Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy, and Wise in a Land of Plenty. “They end up with kids who aren’t terribly responsible, hard-working or ambitious and who get themselves into all kinds of trouble as a result.”
In the context of parenting, even the most successful CEOs forget that the challenges and adversity they faced growing up are what ultimately shaped their character. “A lot of them are first-generation money and therefore they don’t have experience from their own parents as to how to model behavior, so they have to learn that on their own,” says estate lawyer Jon Gallo, author with his psychotherapist wife Eileen of Silver Spoon Kids: How Successful Parents Raise Responsible Children. They are founders of the Gallo Institute, which offers workshops for affluent families and their advisors on the psychology of money, children and family wealth. “The CEO wants to make sure that his kids never want for anything. That’s a big trap to avoid.”
As of December 2010, 56 of America’s wealthiest families had joined Bill Gates’ and Warren Buffett’s Giving Pledge by promising more than half their fortunes to charity. In addition to getting billions of dollars into the coffers of the neediest causes, these individual foundations offer an opportunity to strengthen family legacies, teach social and business skills, and give children a sense of purpose beyond their own self-interest.
Use the foundation as a teaching tool. Allocate a small percentage of foundation assets to each child to make discretionary grants. Have them research an organization and then present grant recommendations to the senior board. “That teaches due diligence and leadership skills,” says family wealth advisor Lee Hausner, noting that teens can start to sit in on financial meetings to understand how the assets are invested for growth.
Create a junior board. Children as young as six or seven can sit on a junior board run by the oldest teenager, guided by an advisor from the senior board. The children should be responsible both for individual and group grant recommendations. Says Hausner, “Kids who are inheriting shared assets will learn collaborative decision-making, and you will also be recognizing their individual passions.”
Roll up your sleeves. Teach them that it’s not just about money. Take time on the weekends to volunteer as a family at the local soup kitchen or assemble school supplies for a classroom in need. Or spend a week this summer giving your kids greater perspective by taking a memorable volunteer vacation to build homes in Ghana or repair schools in Laos. The kids will enjoy the time with you and get a valuable lesson in the good your family’s wealth can accomplish.
Rein in the Largesse
As the Oracle of Omaha, Warren Buffett, famously put it, “I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing.” Naturally, you want to give your children more than you had. But by overdoing the generosity, you may rob them of the one thing they need. “Hunger in the belly,” says Lee Hausner, a psychotherapist and author of Children of Paradise: Successful Parenting for Prosperous Families. “Well-meaning parents want to do everything for their kids and in doing that, they don’t realize they are actually handicapping them.”
To avoid the dreaded affluenza virus, she recommends reining in the spending and starting lessons in fiscal responsibility early. For elementary school-age kids, that means doling out a limited allowance for extras and using it as a tool to teach the value of the dollar. High-schoolers should have part-time jobs and chores around the house. Instead of buying your college graduate a car and apartment outright, match their contributions. Hausner strongly advises delaying any significant trust distribution until after career-building years, when the child is at least 35. “If a young 20-something can make as much interest on his or her trust as they can getting their first job, then they may not get a job,” she says, adding that the one exception may be a sort of parental bank to lend money to entrepreneurial young adults who have a vision and a solid business plan, but who might not otherwise secure the funds to get started.
When he was 19, Peter Buffett, the billionaire’s second son, received $90,000 in Berkshire Hathaway stock to do with as he wished. He sold the stock (which today would be worth more than $70 billion), dropped out of Stanford and purchased recording equipment to launch what would become a successful career as a musician, recording artist and Emmy award-winning composer of scores for major motion pictures and TV films. “The things that allowed me to feel safe and trusting as a kid had nothing to do with money or material advantages,” Buffett wrote in his 2010 memoir, Life Is What You Make It: Find Your Own Path to Fulfillment. He added in a later interview, “the support came in the form of love and nurturing and respect for us finding our way, falling down, figuring out how to get up ourselves.”
Don’t Buy Their Ticket
Whatever their choices, children have to be given the opportunity to succeed on their own merit, says Hausner. Griff Harsh may have had the grades to get into Princeton on his own, but his mother’s sizeable and unfortunately timed donation created the perception of a quid pro quo. Using wealth or power to pave roads or pull strings, however tempting, will ultimately undermine your progeny’s confidence. “The idea that I can buy my way and make up for your incompetency is destructive to the child,” says Hausner. “The kid who can’t get into Harvard shouldn’t go to Harvard.” That means curbing your own expectations as well; in an academic world graded on a bell curve, not every child can be gifted. (Keep in mind: You probably didn’t go to Harvard as an undergraduate, either.)
Avoid setting them up for a hard fall by being clear about the origin of the family’s wealth, and the fact that it’s yours, not theirs. “These kids come to expect a certain lifestyle and they have totally unrealistic expectations about how they’re going to get out of college and earn $100,000 a year or more. The CEO has to be able to shape those expectations so the kids don’t have the sense of entitlement,” says Buffone. Hausner advises being even blunter about whose wealth it is: “Tell them, ‘You are poor kids growing up in a rich person’s house.’ ”
When they get into trouble, resist the urge to bail them out. While no parent wants to see their child fail, in the real world, actions have consequences— a critical lesson that is too often lost, says Buffone. “CEOs have considerable resources and they’ll do everything in their power to make sure these kids don’t experience consequences. By doing that, they negate any possible learning from the experience. Bailing them out of jail is a classic example.” Seize the opportunities to teach that lesson early and often, Hausner adds. If a child fails to do his or her chores or breaks curfew, he or she should lose the privilege of taking the car out on the weekend.
You Can say the M-Word.
Talking about money in anything but the most sweeping, general terms makes plenty of people uncomfortable, particularly those who grew up with the notion that such blunt discussions are unseemly, at best. But by initiating the conversation, you also have the opportunity to shape it. “As long as the kids understand that they are not their money, that money is something they have, not something they are, it can be used as a tool for education,” says Eileen Gallo, the Silver Spoon Kids‘ co-author. She notes that children can be taught basic skills around saving and spending as early as age seven.
Hausner recommends viewing the “business of the family” just as you would the “business of the business.” “Successful businesses have a certain organizational structure” including mission/vision statements, set goals, set strategies for achieving them, and regular meetings to review progress, she says. “The same is true for successful families.” Weekly or biweekly family meetings are critical for giving families a context in which to discuss values and goals around money. They also offer a way to get together formally in a household where one or both parents may be working long hours and traveling a good part of the year, and to give parents a chance to really listen to their children, to find out what their passions are and to encourage them to pursue those dreams.
While you’re congregating around the hearth, make sure to share the stories about that closet-sized studio apartment you lived in or the time you were fired from McDonald’s. “Give them the benefit of your own experience as you were coming up,” says Buffone. “That’s the biggest gift you can give them.”
Experts in family harmony usually counsel against acting like a CEO in your own home. At the same time, many of the same strategies and tools you use to propel your business to the next level can help the family achieve success over the long term.
- Identify the family goals. Whether your goals are to encourage higher education, inspire creativity, give back to the community, prepare the next generation to run the family business, stating what you hope to achieve will help you set the strategy to get there.
- Spell it out. Just as a statement of purpose rallies the corporate troops around a shared vision, having a similar document for the family can inspire members to pull together toward common goals.
- Create a strategy. Once you’ve set an agenda, commit to behavior that will move it forward. “These can’t just be words on a page,” notes family wealth advisor Lee Hausner. “If the family’s agenda includes making the world a better place, there needs to be some active philanthropy going on.”
- Measure your progress. Using regular family meetings, review the family’s progress over the course of a week or two. For example, if one of the goals was to teach the children to make smart choices, review the kids’ allowance spending in the family meeting and find out if they were pleased with the results.
- Hold team members accountable. While you probably don’t want to introduce incentive compensation into the household, kids should be expected to follow the rules and make contributions to the family mission, or face the consequences of lost privileges. Spell out your expectations that your kids be self-sufficient. “When you’re really clear, kids do get competent. They understand they’re not going to get a free ride.”