Helene W. Stein and Marcia C. Brier Family Legacy Services, Needham, MA, Preview of the June 2001 Trusts & Estates. Helene W. Stein, Ph.D. and Marcia C. Brier are partners and founders of Family Legacy Services. They can be reached at MBRIER827@aol.com or helene@rcn.com.

To the vast majority of Americans, the problems of wealthy parents are unimaginable. People assume that because a family has all the money it needs to finance education, travel and quality of life, the wealthy parent's role is an easy one. It is certainly true that the burden of uncertainty and insecurity that comes with being afraid there won't be enough money is lifted from families with high net worth. But any parent who has ever tried to establish a financial plan for his or her child knows that along with the security of having money comes the awesome burden of teaching social and financial responsibility in the midst of plenty.

Look to your own behavior first. Appropriate limit setting is tricky for all parents, but when money is not a concern, parents must be even more certain and articulate about their own values and beliefs and be willing to behave accordingly. This is indeed the trickiest task of all.

Teaching wealthy children to be responsible and productive requires that parents take a long-range view. Crucial elements to this approach are setting appropriate expectations for their children, giving their children increasing responsibility as they grow, and talking openly with their children about money and the duties that come with it. More powerful than anything children hear is what they see. Children learn values by their parents' behavior, not by their words. Parents must be certain that what they are doing is consistent with what they are telling their children. They must take a look at how they spend their money, how generously they give to charity, and how they invest, and ask, "Is this what I want my children to do?" If the answer is "No," parents may need to make some changes in their own financial life and in their own behavior.

How does a child become a responsible citizen? As children grow, so should parents' expectations for their behavior. As each stage of development unfolds, parents can increase a child's responsibility. For example, even a young child can be expected to pick up his or her toys, rather than waiting for a parent, nanny or maid to do it. Putting away toys is not about money. It is about being a family member with contributions to make. That is an important lesson to learn, because the family depends on each of its members to fulfill his or her responsibilities. That is true in wealthy and poor families alike. The core that is the most important is the family unit. "Please" and "thank you" are important for everyone.

Every child must become a citizen of a larger society, and there are rules for conduct in that larger arena, no matter one's wealth. If a parent requires a child to speak politely, but the child hears the parent speak rudely or imperiously to the housekeeper, gardener, or salesclerk, what is the message? Do you really want to teach your children that you only have to be courteous to people who are your financial equals or superiors?

There is no substitute for open communication with children. Talk, talk, talk, and talk some more to them about a range of issues that concern the family, as well as issues in the local, national and international news. We are a global society and will be even more so by the time our children are grown. Parents must keep in mind that if they listen to their children's ideas with respect, children will be more respectful of their parents' ideas.

Try to set aside time each week for the entire family to be together in an atmosphere that is conducive to open conversation. Parents have to curb any tendency to preach to their children or it will not be a conversation. Share your ideas with your children, ask questions to draw children out, and listen respectfully to their answers. Give concrete examples to help bring topics alive. Over time, parents can begin to involve children in some family decisions, even about money. For example, if a child says that he or she wants to give money to a charity that would not be a parent's choice, parents should not discourage the child. Instead, they should find out why the charity is of interest to him. Parents will learn a lot about their child's thinking and emerging moral development.

Children must be taught to share their good fortune with others. Even the youngest child can learn to share some of what he or she has with someone who is not as fortunate or who has none. To learn how to spend money, it is important that children have an appropriate amount of money to spend. Through gifts, allowance and earnings, parents should give children modest amounts of money to manage, as their age and level of maturity dictate. It is never wise to give children more money than they have the good judgment to handle just because it will not matter financially if the money is lost. Amounts can and should be increased as the child demonstrates good judgment and higher-order reasoning.

Philanthropy is a key factor in teaching children to be responsible managers of their money. As a child begins to accumulate money to manage, parents can begin to teach charity and philanthropy by requiring the child to set aside a reasonable portion for charity. Then parents can help children decide where that donation should go. To help children understand philanthropy, it is important that parents set an example and involve the family in an active way. Family foundations or favorite charities can be a source for family projects for everyone to participate in. Families can develop their own traditions of participating in philanthropic endeavors at holiday times and other regular times during the year, e.g. specific fundraisers and charity events; working in a soup kitchen or food pantry; delivering holiday dinners, etc.

Wealth is not an entitlement. A tricky problem for many parents is discouraging children from believing that they are entitled to be wealthy and have their own money. Parents must consistently convey to their children the fact that the money has been earned by someone's hard work, and wealth requires responsible caretaking. Affluence does not mean a free ride. They should be learning about the world of work as they are learning about handling money responsibly. Children in primary school grades are prime candidates for this kind of learning. They enjoy acquiring new information and new skills. They are still of an age to use fantasy and imaginative play to explore new ideas and new possibilities. Young children can appreciate how an investment account grows over time.

As they get closer to middle school, they are ready to learn to invest and put their own money to work. There are many ways to do this. Talk about how the stock market works and how investments accrue or lose value. Set up a "pretend account" or a small real account to teach children about investing. Explain how money increases at different rates depending on how it is invested, and explain the different kinds of investments and how they work. As children mature and become more knowledgeable, parents can begin to elaborate on other factors associated with investing, such as risky versus conservative investing; creating balance in a portfolio; the ups and downs of a fluctuating market; and how national and international politics influence the domestic stock market.

Being a wise consumer is a learned skill. In addition to helping children learn to invest, parents should let children spend their own money for things they want. This is an especially difficult task for parents when they watch their children buy something that is simply an overpriced piece of junk. The most effective way for children to become discerning consumers is through their own experience. Children will learn more from their own mistakes and disappointments than from a lecture. Parents should also not be in a rush to give the child more money to go buy the next thing just because the first one disappointed him. They should let the child understand the consequences and learn some patience for the next time.

Clearly, parents do not want to reinforce temper tantrums that a young child may throw because he or she wants something in a store. When parents give in to tantrums, they are teaching children that they can get whatever they want if they scream loudly enough and cause a scene. This entitled behavior carries over into adolescence and young adulthood, only the toys are much more expensive and elaborate. Entitled children make for entitled adults.

Again, teach by example. What does a child learn when you are setting limits on his or her spending, but you place no limits on your own; when your buying habits are driven by the advertising industry rather than your values? Just because a parent can afford it is not a good enough reason for buying every new toy for adults either. If they do, children will follow suit.

Know your child. Each child is different, and each child's ability and interest in working with money will be different. Parents learn a lot about their children as they watch them grapple with responsibility of managing their money and learning about work. One child may show an interest in business and finance and demonstrate a real grasp of financial concepts, while another may show a particular interest in a completely different area like the arts or humanities or philanthropy. It is very important to know your children's interests and skills so that you can nurture their talents appropriately. Such information will figure prominently into your own estate planning.

Each child has a unique pace for learning different kinds of information. Just because a child does not seem to grasp a concept at a specific point in time, does not mean the lesson is lost. Some developmental stages are more conducive to learning a new skill than others. For example, the school-age child may be more amenable to financial discussions than an oppositional teenager. At some point a child will retrieve the information and skills that parents have taught them and will be able to use them on their own. Even if the child never develops much facility with finance, he or she typically will have learned the lesson of the bigger picture and will feel comfortable enough with the concepts to seek appropriate help.

Professional financial advisors can help you teach children, too. Parents should introduce their children to their attorneys, accountants and financial planners. Children should meet these people while their parents are alive and become familiar with them, especially if they will play a significant role the children's lives should anything happen to the parents. How these professionals respond to your children will be a good indicator to parents as to how helpful these advisors will be to your children in the future. Child rearing is itself a long-term investment plan. It will only be as good as the careful tending that parents give to it.

Copyright 2004 Barry W. Finkelstein JD