BI > MARCH 2004

When Kids Are Spoiled by Success

Help for Parents Trying To Instill Good Values

Are you a financially secure parent worried that your wealth could turn your children into spoiled brats? Even if you don't consider yourself affluent, you'll find that Dr. Gary W. Buffone's new book, Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty (Simplon Press, 2004), offers timely, no-nonsense advice for handling the problems and challenges of today's children.

The author, a consulting psychologist, specifically directs his work toward parents who might feel that their children:

• Are spoiled or ungrateful.
• Are overly focused on material possessions.
• Lack an understanding of the value of money and how hard it is to earn it.
• Lack initiative and a healthy level of achievement.
• Won't be able to make it on their own.

Buffone specializes in providing advice to parents and families on psychology and money issues. He has been cited in several major financial magazines and Web sites. Presenting many true stories based on Buffone's 25 years of experience, this book identifies the inherent emotional and psychological problems families face amid prosperity.

The Future Rich, Simply Wealthy and Super-Rich

The author expects the average reader of this book to have a household income of around $100,000 or more (slightly more than the average income level of an NAIC member, according to a 2003 study by Media Research Inc.). But Buffone reminds readers that "whether your income happens to be a bit less, or much more, you're rich, and a great deal better off than most people on the planet."

The author points out that prosperous families come in all shapes and sizes, referring to these different groups as "the future rich, the simply wealthy and the super-rich." Which category are you in?

I would guess many NAIC members are the future rich, people who are "not currently millionaires but will likely become one in the not too distant future," as Buffone describes them. Another definition of the future rich is "middle-class individuals who work and save hard with the ultimate goal to be able to retire someday and live the life they've planned for years." While this group isn't rich in a "glamorous sense, they are comfortable and enjoy a reasonable standard of living," he says.

The operative word in "future rich" is "future." The United States stands on the brink of a huge intergenerational transfer of wealth that will catapult a large number of middle-class families into significant wealth. The Social Welfare Research Institute at Boston College has estimated that baby boomers and their offspring will inherit $41 trillion (that's right, trillion) over the next 50 years. Thus, boomers, their kids and grandkids will be the future rich. These huge transfers of wealth will thrust a large number of Americans into the complex scenario of managing this newfound wealth without "ruining themselves or their children in the process," Buffone writes.

Buffone's second group, the simply rich, are already millionaires. He points out that being a millionaire means less than it did a few decades ago because of inflation. There are an estimated 4.9 million millionaire households in the United States. Some estimates are even higher.

There is a relatively tiny collection of the super-rich, individuals worth from the tens or hundreds of millions to the billions of dollars. There are more than 100 billionaires in the United States.

Effects of Financial Success on Children

All three groups appear to have it all. They have achieved a large part of the American Dream. Yet despite all this wealth and privilege, there are many concerns about the effects of financial success on children.

"Are our children, who seem to have everything, happy and building positive values and self-esteem?" Buffone asks. "Do they have a healthy appreciation for money and 'things,' and are they willing to work hard to earn them?" The answers to these questions aren't taught in school, nor are they offered in the nation's best business curriculums. Few parenting books offer advice on how wealth negatively affects children, particularly adult children, and what parents can do to prevent problems.

The first section of Choking on the Silver Spoon discusses the phenomenon of American abundance and offers an outline of the inherent dangers families face amid this good fortune. The author provides a definition and characteristics of what he calls the Silver Spoon Syndrome.

The second section offers guidance to parents of children with Silver Spoon Syndrome. The author lists his Five Immutable Laws of Financial Parenting to guide parents as they make delicate decisions about their children and money, regardless of each child's age or stage in life. Buffone's laws are:

• The Law of Necessity: Don't give them more material comfort than they need.
• The Law of Loving Limits: Fulfill their nonmaterial needs.
• The Law of Reciprocity: Make them earn it.
• The Law of Fiscal Responsibility: Teach them money management.
• The Law of Example: Practice what you preach.

A number of self-assessment tools are provided to help determine where parents and children rate in such critical areas as proper discipline, positive motivation, fiscal savvy and teaching by example.

In the final section of the book, the author presents help to parents in applying these guiding principles and practices throughout the family life cycle, including using allowances to teach youngsters about money, launching the reluctant young adult, fostering a strong work ethic and tips on the best ways to transfer wealth to the adult child.

Many parents and grandparents who have succeeded financially have serious concerns about how their prosperity will affect their children. Choking on the Silver Spoon offers timely, compassionate guidance that will help you raise happy, well-adjusted and financially secure children, no matter what their age or stage in life. The book is aimed at helping you protect your most valuable asset: your children.

Jeff is director of educational development for BetterInvesting. Readers interested in sharing their experiences and stories about young investors are invited to contact Jeffery Fox at BetterInvesting or at jefff@better-investing.org