Recently, I had the pleasure of meeting and listening to Julie Lythcott-Haims, the author of the bestselling book, How to Raise an Adult.
Her message is one of how affluent parents do their children a disservice by thinking of them as “kids” past a certain age and undermine their self-efficacy by doing things for them rather than expecting and trusting them to do for themselves.
The main point is that humans are mammals and, as such, the goal of parenting is to teach children to fend for themselves and be independent. In her 10 years as Dean of Freshmen at Stanford University, she saw a disturbing trend in which children from lower income backgrounds were far more prepared for adulthood than their affluent peers. College students of affluence thought of themselves as still being “kids” and their parents treated them as such. She refers to these kids as “Stepford kids” who don’t have distinct and well-formed selves, but instead exhibit utter dependence on their parents and, in many ways, are just mere extensions of their parents.
Age Appropriate Activities
Using resources from the Family Education Network, Dean Julie’s chapter on teaching children life skills is particularly impactful. For example, young adults transitioning from being teenagers need to prepare to live on their own and should already know how to: (1) perform sophisticated household chores; (2) prepare and cook meals; (3) fill a car with gas, add air to a tire and change a flat; and (4) interview for and get a job, including making their own travel arrangements.
These young adults should also work on mastering the following skills:
- scheduling their own regular doctor, dentist and other healthcare appointments;
- understanding finances—managing their bank accounts, balancing their own checkbooks, managing a credit card and paying their own bills;
- understanding basic contracts like apartment or car leases;
- interacting with advisors, such as the agent who handles their auto/renters insurance, the preparer of their income tax returns and any trustee who decides on distributions to them; and
- scheduling oil changes and attending to basic car maintenance.
Do you or your clients have children over 18 who haven’t yet been expected to master these baseline skills?
Financial Matters and Trusts
For advisors in trusts and estates and wealth management, applying these concepts and lessons into our world isn’t a big leap.
On the financial side of things, children whose parents say, “I trust you to be responsible and do the right thing” typically step up and handle their Uniform Transfers to Minors Act (UTMA) accounts responsibly when they reach age 21 and are well positioned to be their own trustees soon thereafter—seeking the help and support they need. Children who are told they cannot control their trusts or take charge of their own financial affairs until they are middle-age, will hear and internalize that message perhaps with resentment, frustration, self-doubt and low self-esteem.
Certainly, it’s important to take into consideration the impact of the amounts and types of assets that are involved. Allowing a 21 year old to take responsibility for a $250,000 UTMA account or a 25 to 30 year old to be trustee of a trust with $1 million of marketable investments is different from giving him sole responsibility to handle $50 million. Moreover, if the trust has ownership interests in operating businesses, then it might not be appropriate for him to be in control of that ownership interest. Other considerations include whether the child has any physical or mental disabilities, possible addictions, maturity levels, willingness to invest time to become adequately educated and legal problems.
These considerations aside, in some plans, inheritors with no impairments are never permitted to control their own inheritances, with third parties or corporate entities designated to control the family money forever. Sometimes, when parents are asked why they haven’t permitted their children to have more control, they indicate that their advisors instructed them that it had to be that way and that they didn’t even realize they could enable their children to be more involved in their own financial affairs.
Another aspect of Dean Julie’s message could be reinforcement that perhaps it’s healthier for children not to merely inherit wealth, but to have the opportunity to create their own. Perhaps the answer is that it’s best when children as young adults have only enough financial resources “to do anything, but not enough to do nothing” as Warren Buffet has so famously said.
There’s no rule of thumb that will work for each family and each individual. But I encourage estate planners and other professionals involved in the wealth management field to be more open-minded about the potential value of empowering children and young adults to feel confident about handling the family’s wealth and to be empowered with the tools to do so. Helping clients to infantilize their adult children and send the message that such children aren’t smart enough or trustworthy enough to handle things can create a self-fulfilling prophecy that leaves them utterly dependent on the judgment and decisions of others. This requires laying the proper foundation during childhood and providing continuing education and support.
What do you think? This is an interactive forum. Please share your thoughts in the comment section below.