In 2006, I attended a rich-kid investing camp designed to teach tomorrow’s heirs and heiresses how to manage money.
They were all in their 20s or early 30s and expected to inherit millions and, in some cases hundreds of millions, of dollars. Few had ever interviewed for a job. Even fewer knew what a mutual fund was. One student asked, “Where does the money for credit cards come from?” (Answer: Dad).
Those were the pre-crisis days of course. Today, many of America’s silver spoons won’t have the same fortunes to dip into later in life because of market losses. Their parents, facing lower returns and less capital, yet refusing to give up the life to which they have been accustomed, may not plan to give them as much.
A survey from U.S. Trust of people with more than $3 million in investible assets finds that fewer than half of the parents think it is important to leave money to their children.
Among Baby Boomers especially, leaving the family fortune to the children clearly isn’t a top priority, with about 39% saying they don’t have a comprehensive estate plan. In short, the Boomers aren’t ready to give up their fortunes (if they ever will be) and they don’t think their children are ready for the cash.
Only a third say their children will be able to handle any inheritance, and nearly half say their children won’t reach a level of financial maturity to handle the family money until they are at least 35 years old.
About half haven’t told their children how much money they have. When asked why, they said the children would become lazy, make poor decisions, squander money (or fall prey to gold diggers. (And whose fault is that?)
“There is an expectation about the wealthy that they have an implicit, sacred responsibility to pass down their fortune to the next generation, and this understanding has shaped expectations about the coming wave of intergenerational wealth transfer,” said Sallie Krawcheck, president of Bank of America Global Wealth & Investment Management. “Our research, however, uncovered a distinct generational mindset that reflects changing views about what retirement means and an evolving sense of what one generation owes the next. ”
Indeed, the twin problems of growing up with too much money and yet not getting much of an inheritance may become increasingly common among today’s children of privilege.
It is (almost) enough to make a child almost thankful he didn’t grow up rich.
Do you think today’s rich children will inherit much money? Will they be prepared?