Bill Bonner, the Founder of Agora Financial, a contrarian investment newsletter company of which I am a big fan and subscriber, and author of, most recently, Empire of Debt, has some interesting, and entertaining, thoughts on the issue of kids and money from the perspective of a wealthy parent.
We have decided to tell the children about money.
Not money in the abstract as we talk about it here in The Daily Reckoning, but in the concrete. Our money. Personal money. Direct, immediate, tangible money. It’s time we explained to the children what we have, what they can expect, and what is expected of them. They are growing up now and beginning careers, families, projects of their own, and it’s time for them to learn.
The thought came to us during a session with Jules, who volunteered that he saw no reason to work in the summer. His rich friends weren’t required to; there was no reason he should either.
An estate planning lawyer tells him:
‘When families get some money,’ an estate planning lawyer in London told us, ‘things go all right until the guy who made the money dies. Usually, that’s when the problems begin, because the next generation doesn’t know how to preserve it, and they usually don’t even know where it came from. So, they argue over who gets what and why. Finally, it is the lawyers who end up with most of it.’
Of his own sucess Bonner writes:
We were well over the age of 40 before we had any money at all. That was the first time in our lives when we lived in a house with air conditioning. But by then, the wind had shifted and was at our backs. By the time we hit 50, the business was booming and we entered an entirely new stage in our lives. We moved to Paris and the children went to private school. We bought a summerhouse. Things started looking peachy.
But the last decade is the only one the children can recall….. It’s all pretty plummy for those young dandies. Which gives them a limited view of the real world.
He imagines how the conversation will go:
‘Oh Dad,’ Jules is certain to interrupt. ‘What are you trying to tell us?’
‘We are just describing the family business,’ we will explain.
‘Maybe you should come to the point,’ he will suggest.
‘But this is the point,’ we will reply. ‘This is the family business. We are telling you about it, because that is how we are able to live the way we do and send you off to Boston to go to college next year.’
‘But Dad, I’m not interested in the family business,’ replied Jules.
How does it all end? When Bonner tells his kids that they won’t inherit any money (Part II):
‘Are you kidding, Dad?’ Jules chimed in. ‘As soon as you’re gone, we’ll have this place up for sale and we’ll take the money and buy a condo at the beach …. where there are no shutters to paint….’
‘And no stone walls to put up,’ added Henry gleefully…
‘And a TV in every room,’ Edward added, getting into the spirit of it.
‘We’ll sell the business, too,’ Jules went on. ‘You have to work all the time… I don’t want to work like that.’
‘But don’t worry, Dad,’ said Henry, generously. ‘We won’t sell the gypsy wagon; we need somewhere to store our video games.’