Christabel Lee was 12 years old and had just saved up $90 for a new bicycle when her wallet disappeared with all her cash in it. She asked her parents if they would buy the bike for her, but they refused. It's not that they couldn't afford to help. Lee's father is vice chairman of a major Hong Kong conglomerate; her family is rich. Lee, now 36 and the managing director of a printing company, remembers crying about the injustice of it all. But today, she recognizes that she gleaned a valuable lesson from the incident: money does not necessarily grow on family trees. "[My dad] instilled strict financial discipline on us when we were young," she says. "It taught me that it's good to plan and save, and that no one's going to come save you if you screw up."
Lee's experience shows how one family answered a common question facing wealthy (and some not-so-wealthy) parents: When children grow up amid plenty, how can they be taught to be sensible about money? We're not talking about checkbook-balancing skills. There is a plethora of practical advice for that, just as there's no shortage of guidance when it comes to transferring assets from one generation to the next. Harder to come by is advice for parents on how to bequeath to their children not just a fat inheritance, but also the values and work ethic that produced their nest eggs in the first place. "So many wealthy families don't know anything about raising kids in a healthy environment," says Thayer Willis, author of Navigating the Dark Side of Wealth: A Life Guide for Inheritors. The daughter of multimillion-dollar parents herself, Willis says she was a "spoiled brat" in her youth. She quit jobs whenever things didn't go her way and spent money without limits until she realized this was not the path to a satisfying existence. "Outsiders think, 'If I just had financial wealth, life would be so easy and I would be happy,'" says Willis, who now counsels wealthy families. "But none of us is given a meaningful life. We're meant to build a meaningful life."
Of course, the children of wealthy parents don't always grow up to be self-indulgent, feckless adults, just as deprived children don't always become driven overachievers. But literature and media are stuffed with rich-kids-gone-bad stories, and there's plenty of anecdotal evidence that cosseted offspring can lack the thrift, independence, ambition, persistence and entrepreneurial spirit that contributed to their parents' success. Most people have heard of the "shirtsleeves to shirtsleeves" curse, which holds that family wealth, once accumulated, is typically dissipated by the third generation because trust-fund babies, having little regard for the money that has come to them without toil, lack the motivation to strive. It's a worry even to perhaps especially to the superrich. In a recent interview in London's Sunday Times newspaper, Indian-born steel tycoon Lakshmi Mittal said flatly that "money is a curse," and that he was concerned that extreme wealth might be spoiling his young kids. In June, Microsoft founder Bill Gates reiterated that he would donate most of his $58 billion to charity, rather than give it to his three children. That's tough love.
According to Willis, money alone isn't the problem. Rather, it's that kids in wealthy families often are given too much freedom, which leads to a sense of entitlement and a lack of accountability. Underlying the selfishness is insecurity, say Jon and Eileen Gallo, co-authors of the book Silver Spoon Kids: How Successful Parents Raise Responsible Children. "They grow up worried inside, thinking, 'Do people like me for who I am?'" says Jon. "It's about developing an identity of their own that's separate from their parents and their parents' money." Being born into wealth often means having a nanny, maid, driver and bank trust officer in other words, having a staff of people to solve all of your problems. "Sometimes very wealthy parents use money to fill in potholes in the roads so that kids don't have to deal with problems," says Jon. "But dealing with the potholes is how you learn about life."
Parents don't have to be child psychologists to help their kids become responsible adults. Some common parenting set pieces can lay a good foundation. In homes with nearly limitless assets, the challenge is to create limits, so that children can learn that money is something to be earned and husbanded it is not a birthright that they are free to squander at will. One of the first steps parents should take is setting up an allowance for kids as soon as they start school, according to the Gallos. "The purpose [of an allowance] is to learn how to budget, to be able to plan for things to buy to postpone gratification," says Eileen. When the kids reach high school, parents may want to introduce debt into their financial vocabularies by allowing them to use credit cards. But the Gallos recommend training wheels first, in the form of debit cards or cards with a low spending limit.