How to Create Lasting Wealth for a Family

Chances are you’re reading these words while at work. Chances are you’re tired.

There are 80 waking hours in a standard Monday-Friday, and you’re working at least half of it–maybe even all of it if you’re in finance, law, medical residency, software developing, or another high stress job at the expense of sleep and family time.

If measured by hours, your life revolves around work.

The long hours. The school debt you incurred for the privilege of working these long hours. The college savings plans you opened. The money you’re putting aside. The unceasing exhaustion.

“I’m doing this for my children,” you say.

Life is going to be so much easier for your child than it was for you. You’re going to out-work, out-save, then leave an inheritance.*  You envision this inheritance will give them a platform from which they can scale even greater heights than you could. Historically, has the dream matched reality?

Delicate readers may want to cover their eyes for what comes next.

Shirtsleeves to Shirtsleeves in Three Generations:

The numbers are saying that children (and grandchildren) are the great destroyers of wealth. Your children will more than likely take down everything you’ve worked hard to build. If they haven’t obliterated it, then your grandchildren will.

Would you invest $1,000 in a company that has a 30% success rate? Might as well go to Vegas and bet it all on black–you have better odds (47.4%).

But your cherub-cheeked child is different (those numbers though!). But your kind, caring kid is special (those numbers though!). The unsaid implication is that a good education and being raised around others with money will not help–after all, those with money or businesses to pass on to their children tend to live in good neighborhoods with highly ranked schools and have peers who come from similar means.

Why Does This Happen?

Taxes? Yes. Wealth spread over many children? Sure.

But also: Uneven distribution of work.

Here’s the problem. In many cases, time is money. The New York Times put it this way

The most highly paid workers were twice as likely to work long hours as the lowest paid…21 percent of them—mostly men, it should be noted—said they worked at least 60 hours a week under highly stressful conditions.

The 40 hour a week, 6+ figure job is rare. Most of the time, you’re using almost all of your time to make the money your children will eventually deplete.

At the core of the problem is that the hours spent developing skills aren’t evenly distributed between you and your child. Let’s look at Average Anthony and Stressed Susan:

  • Average Anthony works 40 hours a week and takes 2 weeks of vacation a year. This means he works 2,000 hours a year.
  • Average Anthony works 45 years until retirement. This means he works 90,000 hours over his lifetime.
  • Stressed Susan works in a high stress, high income job, putting in 60 hours a week with 2 weeks of vacation. This means she works 3,000 hours a year.
  • Stressed Susan also works 45 years until retirement to maximize her net worth and inheritance her child will receive. This means she works 135,000 hours over her lifetime.

Average Anthony will spend his savings down entirely in retirement so there will be no inheritance for Anthony Jr. To continue the lifestyle in which he was raised, Anthony Jr. will need to work the 90,000 hours himself. The 90 years of work capacity between them is evenly distributed between father and son.

If Anthony Jr. wants to up-tier his income, he very likely has to put in more than average time, therefore back-loading the distribution of hours because, in general:

Average Effort = Average Result

Above Average Effort = Above Average Result

If he does work above average hours, when Anthony Jr. has a child, he will face the same challenges currently facing Stressed Susan.

Susan wants a better life for Susan Jr., so she’s worked to save a $1,000,000 trust fund that Susan Jr. can access when she’s 21. Susan Jr., with that windfall, enjoys quite the lifestyle in Williamsburg, Brooklyn. Because she can–and because it’s sexy–she pursues an entry level job in advertising that pays $36,000 a year.

Susan Jr. visits her fancy friends in fancy countries a few times a year. She wears fancy purses and shoes, befitting of a young millionaire. When she doesn’t like something about work, she quits without finding another job because she has a large safety net, so she has long gaps of employment. Because of these gaps and her lifestyle–she lives a six figure lifestyle–her cash burn rate depletes her trust fund in less than 20 years. In this example, the Susan clan went from shirtsleeves to shirtsleeves in 2 generations, like 70% of people in similar, fortunate situations.

Because of the buffer of the trust fund, she works not only less than her mother but her hours are less efficient than Average Anthony’s because there is more time to get acclimated to new duties, new processes, and new company culture (longer set up times create inefficiencies).

So let’s just say that Susan Jr. works 80% of Anthony Jr.’s hours due to the gaps in employment (remember too that they are less efficient), for a total of 72,000 hours.

The 90 years of work capacity between them is front loaded to Stressed Susan. Stressed Susan works 187.5% of what Susan Jr works, almost twice as much.

Family Parent Hours Child Hours Total Hours
Anthony Clan 90,000 90,000 180,000
Susan Clan 135,000 72,000 207,000

What to do? Here are ways to create lasting wealth for a family.

3 Tips to Create Lasting Wealth for a Family

Step 1: Transfer Skills, Not Just Money

While Stressed Susan was working, she was acquiring valuable skills. However, in working so many hours, she didn’t have time leftover to teach spendy Susan Jr. life skills–especially money management. I have regular “daddy daughter dates” and “daddy son missions” where we have fun, but it’s also one-on-one time to teach them what I know. This is where the lemonade stand idea was born.

Today, I get a lot of “when are you going to teach me how to do an Internet business?” questions from my children (as soon as I figure it out myself!). They’re focused on obtaining skills.

Step 2: Properly Structure the Trust Fund

(The following summarizes advice I managed to receive from a high net worth adviser who advises the super rich…aka people who are not me.)

  • Start the payout in the mid-30s, but 40s are even better. By then, your children will have developed the career and habits whereby a windfall is not going to change how they live life.
  • Structure it as a matching. So for every dollar your child makes in his or her 30s/40s, the trust will match a certain percent.

Step 3: Model a less spendy lifestyle.

(A word of caution from the same adviser)

Even if the trust fund is structured properly, the wealth is still at risk. And in general, it’s due to the parents spending extravagantly, and normalizing a certain standard of living that the wealth being passed on cannot support.

Since Susan Jr. grew up in a 5 bedroom Gladwyne, PA, house; was driven in her mother’s new S-Class that gets traded in every 4 years for the latest model; had family dinners once a week at Michelin rated restaurants; and went on shopping sprees with her mom at Barneys, she thinks this lifestyle is normal. Susan Jr.’s hunger to consume eats faster than she can supply it.


Your child is very fortunate to have you as a parent. Your willingness to work these hours to give them a better life is praiseworthy. But why do all that work without careful consideration of the consequences? No one wants to put in all this hard work just for it to be squandered.

There’s a better legacy than just shiny toys and fancy living for your child if you pass on your skills, structure giving well, and live a life that is not punctuated by consumption. I think there’s also a better way to think about lasting wealth, which I’ll share in my next post.

*You’re not alone. The next few decades will have the largest wealth transfer in the history of the world. Accenture estimates $30 trillion will be transferred to millennials over the next 30 years.

**Anec-data from the high net worth specialist whom I met at a recent golf outing. I am not sure where he got his data.

FREE Guide to Help Your Child Start Making Money Download

Reading about helping your child start a business is a good start, but the real learning and habit formation starts by doing.  I’ve found it helpful to have a quick, easy-to-understand guide.  Just fill in the form below, then click “Download” and I’ll send you the FREE guide!

Help your child launch their first business the right way with this FREE Lemonade Stand Guide, exclusively for subscribers.  It’s a perfect, quick, and comprehensive companion to helping your child learn how to make money like a pro.


We’ll also let you know as we come out with additional guides and tools, so you won’t miss a thing!


No spam ever. Just awesome resources to help you teach your child about money.


An email will be sent to the email address you provided. If it doesn't soon, be sure to check the spam folder!


Leave a Comment