Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation

Introduction

Children who grow up in a wealthy household are bound to encounter mixed feelings, mixed messages, and mixed blessings. That's because parents who provide a charmed lifestyle and leave behind substantial money to their children do not guarantee their children's happiness. In many cases, riches have the opposite effect.

For wealthy families, the stakes are high—not just because there's more money to squander, but also because wealth can fuel dysfunction. Money can provide education, comfort, travel, and exposure to high culture, couture, and cuisine. But money can also paralyze people and strip them of ambition and meaning. Some children suffer feelings of guilt over not having earned their wealth; others find themselves mired in a toxic brew of entitlement and numbing ennui.

These problems affect a growing portion of our country. The estimated number of households with at least $10 million in net worth doubled between 1995 and 2004, from more than 200,000 to more than 500,000, according to Federal Reserve surveys of consumer finance. Households with at least $25 million jumped from 50,000 in 1995 to more than 100,000 in 2004.

Of course, a fair number of the country's and the world's wealthy are worth significantly less as of this writing as a result of the stock market meltdown that began in 2008. In fact, as of March 2009, the richest of the rich who made it to Forbes magazine's list of World's Billionaires found their average net worth had fallen 23 percent, to $3 billion, ...