Wealth – when too much really is too much

From the outside observer, being born into wealth can mean nothing but a life of privilege and luxury. But unless parents understand the specific needs for the 3rd generation they may never find true happiness.

The UK’s youngest billionaire is just 26 years old and is privy to a £9.52bn fortune.

Hugh Grosvenor, the 7th Duke of Westminster inherited his father’s £9.52 billion fortune nine months ago making him the ninth wealthiest person in Britain.

Having spent £5m on his 21st birthday bash, it could be easy to think the young Duke is destined to fritter his fortune away on a lavish lifestyle. But in fact his is described as ‘unflashy’ and is committed to supporting a green energy project rather than embarking on less worthy pursuits.

The Duke of Westminster’s experience, however, is atypical and reflects what commentators describe as a ‘relaxed and happy childhood’.

Many of the later generation super rich struggle to adapt to their lifestyles. Either hopelessly spoilt or excessively restricted, typical third generation individuals struggle to survive never mind thrive in their surroundings.

What value wealth?

To understand the challenges facing the third generation, it is necessary to appreciate what has been formative in their upbringing.

As we have explored in previous articles the first generation has often come from a challenging perhaps impoverished start in life. They have strived and worked hard, making sacrifices to achieve success. Ultimately, they appreciate the value of money since they know what it is to go without.

The second generation watched their parents work hard. They are likely to have grown up without wealth and indeed may have also been deprived their parent’s time and attention. The second generation often feel a sense of inadequacy; can they ever attain the same levels of success as their parents? Simultaneously they may feel pressure to retain and preserve the wealth their parents worked so hard to achieve. Sometimes they push through to expand the empire sometimes they just take care of it.

The third generation, however, will have seen nothing of these struggles since they arrived once the family fortune was secure. Their earliest experiences will often be one of first class travel, five star hotels, multiple houses and the best cars. Such childhoods create a sense of entitlement. Money ceases to have any real value, and ultimately, the third generation are often denied the ability to understand jeopardy; that riches can be lost in an instant.

Frances Stroh’s auto-biography Beer Money: A Memoir of Privilege and Loss tells the account of what it is like to be born into the lap of luxury, only to lose it all.

Sense of entitlement

What this lack of grounding often creates in third generation individuals is a feeling of demotivation and apathy. They will likely lack the drive of the first generation and the sense of preservation of the second generation since they feel entitled to their lifestyle.

This lack of purpose – which is explored in detail in Simon Bloom’s book Passing the Buck: How to Avoid the Third Generation Wealth Gap – can leave the individual unable to understand the link between action and consequences, and their ability to contribute to the family and wider community.

This can lead to feelings of despondency and lack of self-esteem. This in turn can lead to recklessness, drug or alcohol dependency, or a tendency to withdraw from society.

Ultimately the third generation’s very circumstances of birth often undermines their chance to be truly happy and fulfilled.

Parenting challenge

It stands to reason that if you are very wealthy an appreciation of value for money is hard to achieve. If nothing is out of one’s budget then how does one recognise its worth?

The first and second generation, however, remember what it is like to have to work for money and how it feels to be without it, making them fortunate enough to understand its value.

In contrast, the third generation needs to be taught.

It can be challenging for wealthy parents to restrict their offspring’s allowance. In cases where a parent can explain to a child that the money has run out, it is easier for children to accept what they cannot have. But if it is clear to the child that there is plenty of money available and their parents can afford to give them more, how does the parent explain why they are – quite reasonably – restricting an allowance?

At the other end of the spectrum, wealthy parents who are too restrictive in allowances may create resentment and confusion in their offspring. Why shouldn’t the child take a share on what is available, why should they ‘unfairly’ miss out?

Specialist skillset

Parenting is one of the toughest jobs to get right. There is often no one right answer to the challenges parents face, and what works for one family may be entirely unsuitable for another.

Ultimately parents need to be balanced in their approach to helping their children manage their wealthy upbringing, and ensure they communicate the reasons for the decisions they make.

Successful strategies include using wealth to build a foundation on which the third generation can create a meaningful career or venture of their own. Such as providing children with the best possible education and helping them to progress into work that will allow them to create a self-esteem. This approach requires clear communication from both parties so the child’s ambitions are understood and that everyone meets their expectations.

Parents should also think carefully about how they set allowances, stick to clear boundaries and ensure they make it clear why those limits are in place. Children who understand how much they are allowed, why they have that amount and appreciate that when it runs out no more is forthcoming, it helps give context and value.

It is a natural animal instinct to pursue the shortest route to happiness, and humans must learn that financial longevity is not achieved easily. As the saying goes: The lazy man does more work.
It is also important to understand that the third generation may be neither interested nor capable of continuing the family business. First and second generation owe it to the third generation, and to the business, to make an objective assessment as to whether passing the enterprise down through the family is really the best course of action.

Finally parents may benefit from talking to friends, family or other experienced individuals who can provide an objective view. A third party who has some distance from the melting pot of emotions that is the parent child relationship can provide perspective and offer their own strategies for dealing with bumps in the road.

The third generation is often perceived as feckless, lazy and entitled but this is unfair. They have been born into circumstances over which they have no control. It is the role of the second generation to instil in their children the value of money and the importance of creating worth outside of financial reward.

Great wealth has the capacity to create brilliance in successive generations but individuals must be afforded the space, freedom and support to meet their full potential.

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