A golden tomorrow, and you can hasten it

Bad investments: Your kids!
Proper education curbs wealth-wasting tendencies

By Thomas Kostigen
CBS.MarketWatch.com
February 23, 2004

a href=http://cbs.marketwatch.com/news/story.asp?guid=%7BE32F5B0C%2D6CB7%http:/...
2D4DCD%2D9CC6%2DF1BD52661CE2%7Damp;siteid=mktw

SANTA MONICA, Calif. -- One of the worst investments you
can make, it seems, is in your children.

Data show family wealth is entirely lost by the third generation.
And with the largest wealth transfer in history fast approaching
as the parents of the baby boom generation die off, the issue
is a pressing one.

quot;It's a big challenge,quot; says Lee Hausner, author of quot;Children of
Paradisequot; and a psychologist specializing in financial parenting
in Irvine, Calif. quot;Children are ill-prepared to really understand
money management.quot;

Indeed, with the spotlight on trust fund babies behaving badly
-- a la Paris Hilton -- parents are getting a fast education on
the investment results of inheritance.

In a study by Charles Collier, author of quot;Wealth in Families,quot;
more than 20 percent of U.S. millionaires are so fearful of
spoiling their children that they plan to give away most of
their money to charity. Bill Gates has proudly announced
that his children will only inherit a few million dollars each
to ward off quot;a pointless life.quot;

There's no need to dwell on the rampant stories of drug use,
lethargy, and even suicide among young inheritors of wealth;
they have no goals. It's no wonder so much wealth is
squandered.

But is it all so dire?

Theodore Kurtz, a psychoanalyst in Cold Spring Harbor,
N.Y., says it doesn't have to be. quot;Teach kids to be
productive at an early age,quot; he recommends. In a
consumer-based society, when identities are borne of
material acquisition, it's important to instill a sense of self
beyond what can be bought -- especially among those who
can buy just about anything they desire.

Wealth management firms are facing the issue head on.
Bessemer Trust, (founded in 1907 when Henry Phipps, a
partner of Andrew Carnegie in Carnegie Steel Co., wanted
an entity to educate his own family on money) holds regular
meetings and seminars for its clients to educate and instill
values. Citibank Private Bank now hosts quot;retreats,quot; with
seminars, guest speakers, and financial planning forums for
children.

Two heirs have even taken to forming an organization
themselves to deal with the wealth dilemma. Anne Slepian
and Christopher Mogil founded More Than Money in
Cambridge, Mass., to help them cope with the financial,
psychological, familial, and societal consequences of their
inheritances. They are quot;committed to changing the way
society understands the purpose, potential, and challenges
of money.quot;

Still, education has to start at home, and according to a
Charles Schwab amp; Co. survey, half of all adults with children
under the age of 18 feel talking about money with their
children is quot;too personal.quot;

Meanwhile high school classes on personal finance have
dropped, and less than half of all high school students are
taught even basic economics, according to the National
Council on Economic Education.

Teenage spending, however, is up. Teens account for some
$170 billion in consumer spending. That's an increase of
almost 40 percent from just five years ago.

Some children know at least enough to admit that they don't
know about money and finance. For others, there's only one
solution: spend.

To be sure, this isn't ignored. Indeed, young adult spending
is being vaunted.

Seventy-five percent of young women, according to an
Oppenheimer Funds study, suffer from quot;Sex In The Cityquot;
syndrome, where they believe they should look wealthy
even if they're not. Hence, purchases of expensive
handbags, jewelry, and clothing.

quot;Rich Girls,quot; a reality television series, focuses on two
wealthy girls shopping in Manhattan. quot;The Simple Lifequot;
with Paris Hilton and Denise Ritchie showcases their
Louis Vuitton luggage, designer outfits, and expensive
sunglasses. quot;Born Rich,quot; a documentary by Johnson
amp; Johnson heir Jamie Johnson, tries to elucidate on
stories of the young and rich but actually just titillates
with shots of limousines, penthouse views, and
mansions.

Amusing. Entertaining. But sad, really.

Like any investment, understanding it is key. quot;Education
is important and from a very early age,quot; says Hausner.
If you want to make the investment in your kids a good
one, quot;Give them the skills they need to deal with their
finances,quot; she says.

Several studies by different colleges and universities find
money and spending don't play a large part in the relative
happiness of teenagers; a loving family scores highest on
the happiness chart.

Now there's an investment idea.

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