Saturday, January 19, 2008

Raising children with wealth

I am of the opinion that children must be raised so that they will independent when they become adults. Children shouldn't be spoiled (says the man who already wants to give his one year old child everything). How do you do this if you are blessed with great wealth?

New York magazine examined the subject with a recent article. Interviewees for the article included Jordan Roth, son of the CEO of Vornado Realty Trust; Jamie Johnson, a J&J heir (who has made a documentary about the subject, Born Rich); Tommy Gallagher, CEO of an investment group; and Holly Peterson, daughter of a Blackstone Group founder.

The Holly Peterson tale was the best:

“It’s very simple: Either your parents are comfortable paying for everything in your twenties and letting you coast financially through that period or they are not,” says Holly Peterson, the daughter of Blackstone Group co-founder Pete Peterson, whose estimated net worth is $2.5 billion. She’s worked in television and print journalism since graduating from college and recently published The Manny, a satire of wealthy women on the Upper East Side. “Are your parents buying your apartment and giving you the clothing budget and giving you cash to go to J.G. Melon’s?” she continues. “My father didn’t. I couldn’t not work. When I was at ABC News making $32,000 a year as a researcher, my father was giving me $600 a month, which was the difference between a studio walk-up and a place with a doorman—he didn’t like those townhouses with the double doors that girls were getting attacked in.” To this day, Peterson still reimburses her father if she uses his car service. Recently, when The Four Seasons accidentally charged his account for something she ordered and sent to
friends who were dining without her, he faxed her the bill with a note that said
WHAT THE HELL????? “But in my twenties—that was when we used to argue a fair
amount about money: How much he would supplement, why he decreased the amount when I got a raise,” she says. “I would point out that in the last 30 seconds,
he had just earned in interest the amount I was asking for. And he would lean over the table and say, ‘I know you don’t understand this now, but the greatest gift I can give you is your independence.’ And twenty years later, I hate to admit this, but I think he was right.”
Warren Buffett isn't leaving his vast fortune to his children, but to a foundation. His children will have to work. The same holds true for Bill Gates.

For those that want to keep the vast family fortunes going from generation to generation, several resources are mentioned in the story, including Wealthbridge Partners, Family Wealth Alliance, Relative Solutions and Sudden Money Institute.