Legacy For Our Children
If you never had children, then you just wouldn't understand; unless you're Warren Buffet
Some of my friends make fun of the fact that I am leaving the majority of my possessions to my children. They state that my children would jump at the chance to sell my life-long accumulation of art, collectable automobiles and vintage luxury wristwatches before the crematory could light my fire. These same friends don't believe in establishing generational wealth mechanisms through the creation of trusts. They just don't get it. |
These same friends aren't parents. These friends don't understand the ultra competitive element that exists within this world. They don't understand that our children need an edge to not just survive but to be able to compete in this game we call life. These people don't seem to understand that life is not only what you make of it but also having an "edge" would certainly improve the quality of life. Why wouldn't anyone want that for their children?
Leaving heirloom items for our children to enjoy or providing supplemental income from a trust for their benefit is not over-indulgence or spoiling them so that they can be complacent and idle. Notice I used the words "supplemental income". Unless you are a soft shoe'd blue blood or a nouveau riche person with a gazillion dollars to spread around, most trusts are less than a million dollars. An annual draw from a million dollar trust that has an average growth of 16% a year wouldn't have a person in soft shoes for long. The NetJets card could be revoked mid-flight. Even if you are a gazillionaire, I think that we need to live by example in order to educate our children on the fundamentals of money, how to invest it and certainly how to keep it.
You can't keep money by being complacent or idle. People need to be productive regardless. Very few trusts last forever. If you are a blue blood and you don't have the burden of worrying about your trust ever drying up then you have a moral and humanitarian obligation to use your money in order to make things a little better in the world.
My father firmly believed in education. Although he wasn't rich, he made sure I was educated in the best private schools. The same schools the wealthy sent their children to. I saw the effects of privilege on these kids. They felt a sense of entitlement. They were pompous, pretentious and just downright lazy. These same kids grew up and it shouldn't be a surprise as to what type of adults they became. I actually ran into one of my former schoolmates a couple of years ago. I asked him what was he doing with himself and he said that he was looking for a job because waiting for his trust to kick in and his parents to die so he could inherit their millions was taking too long. Can you believe that? He came from a blue blood family and that was his family's future...a ungrateful spoiled jackass.
Another schoolmate's parents went broke not too long after his junior year in college. Up until that point, he enjoyed a privileged and idle lifestyle. The new sports car every other year, $500 a week allowance money (that was a lot of money in the 1980's), all his off campus apartment expenses paid, summer vacations for him and his buddies, etc; you get the picture. When his parents informed him of their financial situation and told him that he would have to provide for himself, it was like they put a gun to his head. He had a complete mental breakdown because that meant he would actually have to get a job. The poor fool has struggled through life ever sense and amounted to nothing. Every advantage in the world and he took it all for granted. Now all he has to show for it is a bunch of kids, a history of unemployment and a criminal record.
That's certainly not going to be my children. In addition to trust income and heirlooms comes the responsibility of preservation. You educate your children so that they can appreciate either the struggle and sacrifice or the obligation they have to increase the heirlooms and the trust so that their children and the next generations can appreciate the edge that they were given. What better way to show your children that you love them by giving them their inheritance while you're still alive to guide them through the challenges that such a responsibility presents.
Whether my children decide to sell the heirlooms after my death is entirely up to them. The cost to maintain the art and the automobiles is incredible. I still don't know how I have manged those expenses for so long. I can only hope they would add to the collections or loan the items to museums for others to enjoy. If they do decide to sell, perhaps they would keep certain items as heirlooms. It means something special to receive an item passed down from a matriarch or patriarch of the family. Here's grandmother's favorite Warhol painting or here's your granddad's gold Patek wristwatch.
Regardless, my children with me as their father will be well prepared to face the challenges of building wealth. I will make certain they will have that edge and keep it as long as they live. Future generations will benefit from the seeds that I have already planted within their young and impressionable minds.
Leaving heirloom items for our children to enjoy or providing supplemental income from a trust for their benefit is not over-indulgence or spoiling them so that they can be complacent and idle. Notice I used the words "supplemental income". Unless you are a soft shoe'd blue blood or a nouveau riche person with a gazillion dollars to spread around, most trusts are less than a million dollars. An annual draw from a million dollar trust that has an average growth of 16% a year wouldn't have a person in soft shoes for long. The NetJets card could be revoked mid-flight. Even if you are a gazillionaire, I think that we need to live by example in order to educate our children on the fundamentals of money, how to invest it and certainly how to keep it.
You can't keep money by being complacent or idle. People need to be productive regardless. Very few trusts last forever. If you are a blue blood and you don't have the burden of worrying about your trust ever drying up then you have a moral and humanitarian obligation to use your money in order to make things a little better in the world.
My father firmly believed in education. Although he wasn't rich, he made sure I was educated in the best private schools. The same schools the wealthy sent their children to. I saw the effects of privilege on these kids. They felt a sense of entitlement. They were pompous, pretentious and just downright lazy. These same kids grew up and it shouldn't be a surprise as to what type of adults they became. I actually ran into one of my former schoolmates a couple of years ago. I asked him what was he doing with himself and he said that he was looking for a job because waiting for his trust to kick in and his parents to die so he could inherit their millions was taking too long. Can you believe that? He came from a blue blood family and that was his family's future...a ungrateful spoiled jackass.
Another schoolmate's parents went broke not too long after his junior year in college. Up until that point, he enjoyed a privileged and idle lifestyle. The new sports car every other year, $500 a week allowance money (that was a lot of money in the 1980's), all his off campus apartment expenses paid, summer vacations for him and his buddies, etc; you get the picture. When his parents informed him of their financial situation and told him that he would have to provide for himself, it was like they put a gun to his head. He had a complete mental breakdown because that meant he would actually have to get a job. The poor fool has struggled through life ever sense and amounted to nothing. Every advantage in the world and he took it all for granted. Now all he has to show for it is a bunch of kids, a history of unemployment and a criminal record.
That's certainly not going to be my children. In addition to trust income and heirlooms comes the responsibility of preservation. You educate your children so that they can appreciate either the struggle and sacrifice or the obligation they have to increase the heirlooms and the trust so that their children and the next generations can appreciate the edge that they were given. What better way to show your children that you love them by giving them their inheritance while you're still alive to guide them through the challenges that such a responsibility presents.
Whether my children decide to sell the heirlooms after my death is entirely up to them. The cost to maintain the art and the automobiles is incredible. I still don't know how I have manged those expenses for so long. I can only hope they would add to the collections or loan the items to museums for others to enjoy. If they do decide to sell, perhaps they would keep certain items as heirlooms. It means something special to receive an item passed down from a matriarch or patriarch of the family. Here's grandmother's favorite Warhol painting or here's your granddad's gold Patek wristwatch.
Regardless, my children with me as their father will be well prepared to face the challenges of building wealth. I will make certain they will have that edge and keep it as long as they live. Future generations will benefit from the seeds that I have already planted within their young and impressionable minds.
The slideshow above is exactly why those of us with children do what we do. Those two are my motivating factor as to why I could never be lax when it comes to making, saving and investing money or accepting plebeian results from some account manager at a brokerage firm. And yes...that is me in the rabbit suit!
Below is this magnificent article I came across from financial publisher Tom Dyson. Tom was not born wealthy. He struggled like most of us in the real world and somehow found his way to his fortune. He discusses the obligation of educating your children on the aspects of money. People think that it's something the rich do with their children by default. If you read my essay above you will realize that is simply not the case. |
There is a scene from the film, "Born Rich" produced by Jaime Johnson in which he tried to get his father James Johnson, heir to the pharmaceutical giant that bears his family's name to discuss money. His father was very evasive and opposing toward the subject and stated that it made him uncomfortable. I guess if you never have to worry about money why discuss it. Most people just don't talk about money yet alone teach fiduciary responsibility to their children. I said it during a television interview I did a couple of years ago and I'll say it here; "There is no other group of people more guilty of this than African Americans". Unfortunately, most African Americans haven't had access to money and couldn't share the capitalist dream until about the last 35 years. It's hard to educate your children on something you have never experienced or had. That doesn't exclude the new generations. They have an obligation to educate not only their children but others who need to understand that this dream can become a reality with dedication and planning. My message to African Americans is simple: The extensive and over zealous consumerism cycle needs to end yesterday. |
The Greatest Financial Gift
You Can Give to Your Children By Tom Dyson I wrote this essay for your children and grandchildren. You've probably heard about America's huge debt load. The U.S. government's financial obligations now exceed $663,000 per American family. This burden will fall on the youngest Americans. It's unethical. It's unfortunate. But it's the reality. With this giant financial obligation bearing down on them, it's critical that now...right now, your children and grandchildren learn about money and finance. They need to know the basic principles like how to be independent, why debt is dangerous, and how to grow money. They don't teach finance in schools. If you don't teach them this knowledge, no one will. They call this financial illiteracy. If our children are financially illiterate, they have as much chance of survival as a swordsman in a gunfight. There will be no mercy for the financially illiterate in the future. It's likely these people will live as indentured servants to the government and its creditors. But if our kids have a grasp of finance and its basics and they obey its laws, then they will grow up rich. They will be in a position to help other Americans, too. Below, you'll find the three vital financial concepts all children need to understand. Please pass them on to your children and grandchildren as soon as you can. I have two young children and these three concepts are my starting point for their financial education. First of all, our kids must know that they are not entitled to money or wealth or anything for that matter, even Christmas presents. They must earn money. I want my children to learn that they shouldn't expect anything to be handed to them. I don't want them to rely on the government for their livelihood, like many people do right now. So many people treat money and prosperity as an entitlement. The government even calls its welfare programs "entitlements." This word and what it represents, gets stamped into young people's brains. Kids act as if they are somehow entitled to toys, video games, and cars but why should they be? Just because they have parents, it doesn't mean they should get everything they want or anything at all for that matter. I plan to regularly remind my children of this when they are old enough to understand it. I'm not going to pay my kids an allowance. An allowance would reinforce the sense of entitlement. They can make money by earning it: doing the dishes, making their beds, mowing the lawn; there are a million things. |
My wife and I will pay them for doing those things. But I'm not going to just give them money. The second concept our children need to understand is debt. Debt is expensive. If you abuse it, it will destroy you. Like the entitlement mentality, debt is an enslaver. It robs you of your independence. I avoid debt in my personal life and when I'm choosing investments. The best way to illustrate the cost of debt is to calculate the total amount of interest the debt generates in dollars over the lifetime of the loan, instead of looking at the interest rate (like most people do). Once you look at it like that, you can see how expensive borrowing money really is. For example, say you borrow $100,000 with a 30-year mortgage at 7%. Over 30 years, you'll end up paying $140,000 in interest to the bank. In the end, you're out $240,000 for a house that cost less than half that. Not a good deal. The third thing our kids need to learn is the power of compound interest and the best way to harness it. Compound interest is the most powerful force in finance. It is the force behind almost every fortune. The brilliant Richard Russell calls compound interest "The Royal Road to Riches." And it's mathematically guaranteed. Let's say, for example, you have $100 earning 10% annual interest. At the end of a year, you'll have $110. During the second year, you'll earn interest on $110 instead of $100. In the third year, you'll earn interest on $121 and so on. This is the power of compound interest. The numbers get enormous over time, simply because you're earning interest on your interest. Because time is the most important element in compounding, it's an incredibly powerful idea for children to understand. They have the ultimate edge in the market; the time to compound over decades. The stock market is the best place to earn compound interest. You buy companies that have 50 years or more of rising dividend payments ahead of them. Then you let the mathematics work. As soon as my kids are old enough to understand some arithmetic, I am going to sit down with the classic compounding tables and show them which stocks they have to buy. I'll use Coca-Cola, Johnson & Johnson, and Philip Morris as examples. After that, assuming they have the discipline to follow through, they will get rich. There's no doubt about it. In sum, you have the responsibility to educate your kin about finance. If you don't, no one else will, and they will suffer for it. Encourage them to work hard and avoid the entitlement mentality. Teach them the power of compound interest and explain the dangers of debt. If you do this, you will equip your kids and grandkids to survive financially in the difficult circumstances ahead. You'll provide them with something that nobody can place a price on: the power of independence. |