Family Business

Tips for dealing with children and wealth in a family business

April 13, 2013 

In my last article, I discussed the potential dangers regarding wealth and the family business, and left off by highlighting the importance of educating your children to have a healthy attitude towards money. Given the importance of this topic, today I would like to dive a little deeper into the topic of children and wealth.

The nature of a family business is that it is owned by your family. As you may have read in some of my other articles, over 70 percent of all businesses are family businesses. However, as a portion of the workforce, family businesses are clearly on the opposite end of the spectrum. A quick sampling of your neighbors would probably result in the vast majority getting up and going to work in Research Triangle Park for some tech company, an office building downtown, a government office, a medical facility, or one of the many university campuses. My point is that they work for someone else.

This is a wonderful thing. There is a lot of job security in being with a large organization. And for many people when the small hand hits 5, you can head towards the door. Not so for business owners, if you are not pushing forward every day, then the machine slows down. However, there is also a lot more control that comes with being a business owner, and by definition, you are in charge of everything and everyone. And all the profit goes to the owners.

The contrast between business owners and non-business owners can skew the perspective of life of the children of those business owners. Especially if there is some significant wealth involved.

Lessons from Warren Buffett

There is a famous saying, “Shirt sleeves to shirt sleeves in three generations.” Basically, someone starts a business, the next generation makes it a success, and then the third wrecks it. Why? Because they became disconnected from understanding the hard work required to run the business and felt that there was so much money, and so much money coming in, that there was no need to work hard anyhow. You could simply live a life of leisure. Interestingly, there is a similar saying in countries around the world.

Few people could be more attuned to this dynamic than Warren Buffett. As such, as many of you may have recently learned in Yahoo and elsewhere, he stars in an animated series called the Secret Millionaires Club. The purpose of the series is to help kids understand money and develop healthy habits from a young age.

Reflecting on the saying that “the chains of habit are too light to be felt until they’re too heavy to be broken,” Buffett says “we’re trying to help kids develop healthy habits that will help them their whole life. It’s never too early. Whether it’s teaching kids the value of a dollar, the difference between needs and wants, or the value of saving, these are all concepts that kids encounter at a very early age, so best to help them to understand it.”

Teaching ‘how to fish’

Closer to home, Luther Lockwood with MBL Advisors, part of the McColl Bros Lockwood family office in Charlotte, says, “one of the great lessons that can be learned within a family business is teaching the next generation the value of work, saving money and reinvesting for the future. It’s much more valuable to teach children how to fish than to give them the fish. Very few family businesses perpetuate into the next generation without learning this key lesson.”

Parents know full-well that they are setting the example for their kids by their actions. For family business owners, it counts double. It is so easy to create a more comfortable ride for your child, pick them up after a mistake or ensure they avoid it in the first place. And it can be very alluring to use money to fix their problems.

But the most valuable dollar a child will ever get is the one they earned on their own merit. And the greatest accomplishment comes from trying, failing, persevering and succeeding. And that is how you break the cycle of shirt sleeves to shirt sleeves in three generations.

Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at

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