As financial advisors, we are often asked how old a child should be before he gains access to inherited money or receives significant financial gifts. We know, through experience, that age is a poor barometer of readiness.
But what should parents and trustees look for? How do they judge if funds will help launch a child into adulthood or delay the very maturation they are hoping to promote?
Through interviews I conducted with successful inheritors—those who are self-motivated, productive and content—for my book Raised Healthy, Wealthy & Wise, I discovered that there are four fundamental characteristics children need to develop before they inherit or are given wealth.
The inheritors I interviewed all shared these characteristics. Young people who haven’t yet launched successfully into a financially and emotionally self-sufficient adulthood typically lack one, if not more, of these qualities.
I have started to view this list as a powerful metric. I now tell clients that if their children can develop these characteristics, it’s likely they will be able to handle the money they are given. If they haven’t, no matter how old the children are, inheritances of any size may be very destabilizing.
(The following is an abridged excerpt from Raised Healthy, Wealthy & Wise.)
Core Markers
1. The ability to earn their own money.
For adult children, living off parental income can carry emotional freight that is rarely articulated but keenly felt. Tension about money is seldom about the money itself or the things money can buy, but about what the money symbolizes. When they are beholden to their parents for rent checks, spending money or clothing allowances, inheritors feel trapped in their parents’ clutches. We heard again and again in our interviews that adult children of the wealthy do not feel successful unless they are making their own money.
And it’s not enough to believe you can make money if you need to. We found that in order to launch successfully, inheritors needed to have demonstrated the ability to make money in the past (even if they were demonstrating this to no one but themselves). There is a significant difference between assuming you have earning power and actually experiencing getting paid for your skills. When inheritors have never been tested, the uncertainty about whether they could succeed can seriously undermine their confidence, and they often find that belief and reality do not match up.
We have learned that it is remarkable what children are capable of doing when parents simply present it to them as an expectation. The inheritors we interviewed all took for granted that they would earn their own money because their parents had encouraged them to do so from an early age.
2. Motivation toward a personal goal.
What does it take to be satisfied with the life you lead? Neurologist Viktor Frankl, a Holocaust survivor, determined that even in the most dire circumstances, people can persevere and at times even thrive when they are fueled by a sense of purpose. This led Frankl to conclude that humankind’s primary drive is not toward pleasure or happiness, but the discovery and pursuit of meaning. “What man actually needs is not a tensionless state but rather the striving and struggling for some goal worthy of him,” Frankl wrote.
Unfortunately, it’s common to see inheritors who seem stuck in the status quo. They have trouble engaging fully in everyday life and finding motivation to apply themselves consistently toward achieving a goal. These individuals end up lacking a sense of success. This can be tragically debilitating.
In contrast, the successful inheritors we interviewed all showed a remarkable ability to set explicit goals for themselves—whether it was running an art gallery, practicing medicine or heading the family retail chain—and to commit to working toward that goal. The factor that determined an individual’s sense of fulfillment and satisfaction was not necessarily achieving the goal, but successfully driving toward it. Each of them was motivated by some desire—whether it was making money, acknowledgment in a creative field or pursuing a deeply held interest—that drove them to apply themselves and to experience a sense of earned success that allowed them to lead productive and engaged lives.
3. A grounded sense of self.
Children naturally seek to please their elders, and this often involves trying to emulate their parents or fulfill their expectations. Yet affluent children often experience a sense of guilt (as well as gratitude) for the opportunities they have been afforded and can fall into the trap of focusing their efforts in areas that speak more to their parents’ goals than their own. Separating one’s identity as a person from the identity of one’s family is difficult for every maturing child, and it is made all the more challenging when issues of wealth are involved.
Among the primary hurdles we all face in reaching psychological maturity is becoming comfortable in our own skin—being able to accept and nurture our individual identities. We neither feel compelled to rebel against our parents or against authority nor pressured to comply with all that these entities represent. Emotionally self-sufficient people understand their strengths and their weaknesses. Because they are confident in their ability to adapt, survive and thrive, self-sufficient people also relate well to their environment. These are all important factors in launching successfully into an independent adult life.
With inheritors, this cycle of development is often interrupted. Adult children can feel guilty for the advantages they have enjoyed and fail to develop a healthy self-esteem. They may have been saved so often from learning through their mistakes that they have trouble with perseverance, motivation and self-discipline. Their experiences may be so different from the norm that they feel alienated and suspicious, leading them to be wary and uncertain adults.
Where some hit a roadblock that won’t allow them to move forward with their lives, creating an uncomfortable environment in which they are financially and emotionally dependent on their parents, others are able to find a greater sense of peace where their family money is concerned. They have arrived at a healthy belief in self-reliance. Money does not govern every discussion and every decision; rather, it has assumed its appropriate place among the many concerns of daily life and does not cause undue stress.
The successful inheritors in these pages are comfortable with their relationship to money and do not define themselves according to how much they do or don’t have. In many ways, their family wealth is incidental. Through their stories, we see that it is their sense of personal engagement and motivation that drives them most urgently in life.
4. The ability to overcome setbacks.
Resilience is defined as “the speedy recovery from problems,” and its most apt synonym is flexibility. It is a trait that is essential for all children and adults, regardless of financial status.
A complicating factor is that coping with and overcoming adversity is a core skill that is developed experientially over a period of time. This is why it is critical for wealthy parents to provide their children, from an early age onwards, with consistent opportunities to deal with the consequences of their actions and the actions of others.
Yet children of means are often stymied because they are spared having to muddle through managing their own problems. Time and again, they are saved from the consequences of their errors by well-meaning parents, so they never have a chance to learn from their own mistakes. As a result, they cannot adequately build up their internal resources to address problems and instead often choose the easy way out. Most often, this is reflected in their career trajectories, where they quit as soon as a job becomes boring or difficult. If they don’t need to work for money, then why stick it out?
But the inheritors we spoke with all exhibited an attitude of optimism and self-sufficiency that drove them to commit to goals and strive toward fulfilling them regardless of the immediate rewards. They showed resilience and discipline in spades, believing that, by their own efforts, any problem could be adequately addressed and overcome.
How did this come to be? When parents allow their children to take charge by teaching them that the results they produce depend on their own efforts and actions, they are imparting a lifelong gift. The inheritors we spoke with shared numerous stories of times when they were encouraged and expected to weather challenges on their own. They were left with a palpable sense that they had done it once and could do it again.
Coventry Edwards-Pitt, CFA, CFP, is the chief wealth advisory officer at Ballentine Partners, a multifamily office with offices in Waltham, Mass., and Wolfeboro, N.H.
