NextGen Financial Education and Financial Life Planning

by | Feb 22, 2022 | 360 Wealth

Shutterstock Dean Drobot

The “Sudden Wealth Syndrome” affects individuals and families who quickly accumulate large sums of money (sale of a business, lottery, sports bonuses, stock option grants, an inheritance, etc.) and end up in worse financial shape than prior to their windfall.  According to the National Endowment for Financial Education, about 70% of the people who suddenly receive such windfalls will lose it within a few years.

While this is unfortunate, it’s not totally unexpected because it is impossible to anticipate how to successfully handle tremendous wealth if you are not prepared for it.  The more puzzling statistic is how generational wealth is lost from affluent families.

Frances Stroh, in her book “Beer Money”, documents the fall of Stroh Beer.  Established in Detroit in 1850, the Stroh Brewing Company was the largest private beer fortune in America and a brand emblematic of the American dream itself.  When Stroh was coming of age, the Stroh family fortune was estimated to be worth $700 million.  The book documents the issues with her father’s alcoholism and her brother’s drug addiction as well as the loss of the family legacy and fortune.

Most individuals would consider “Beer Money” a one-off outlier.  However, here are some statistics that prove otherwise:

  • 7 in 10 people who suddenly receive a large inheritance will lose it all within just a few years. 1.
  • 90% of inheritances are lost by the 3rd Generation.2. The trend is so universal that each culture has their own version of “Shirtsleeves to shirtsleeves in three generations.” In Japan, the expression goes, “Rice paddies to rice paddies in three generations.” The Scottish say, “The father buys, the son builds, the grandchild sells, and his son begs.” Chinese – “wealth never survives three generations”
  • The Vanderbilts had at one point been worth over $6.2 billion in today’s money. When 120 of the Commodore’s descendants gathered at Vanderbilt University in 1973 for the first family reunion, there was not a millionaire among them.3.
  • Only 24% of millennials demonstrate basic financial literacy.4.

Financial Life Planning is designed to enable Millennials and GenZ an opportunity to align their values with their wealth to live a more purposeful and meaningful life.  Financial Life Planning is a four-step process: 1) defining values, 2) review of financial resources, 3) designing a plan to reach financial wellness, and 4) implementing, monitoring and redesigning the plan as needed to align values with wealth in order to live a purposeful and meaningful life.

Vida Private Wealth has developed NextGen Financial Education that offers one-on-one attention to familiarize second generation family members the opportunities and risks wealth offers.  It prepares them to think and act as a responsible high-net-worth individual in the world – a unique advantage no college can offer.

Vida works with wealthy families and their multi-generations, and introduces them into the world of financial literacy including the following:

  • The value of money and assets
  • The benefits of delayed gratification
  • Compound interest and how to use it for their benefit
  • Investing
  • Credit
  • Learn how to interact with and manage outside professionals
  • Good debt and bad debt
  • How to plan and work towards their long-term financial goals

NextGens who understand wealth will make informed financial decisions that will help maintain their wealth for generation. When aligning their wealth with their family values, it generally leads to an increase in happiness, and a more fulfilled and purposeful life.

 

  1. .“Financial Psychology and Lifechanging Events: Financial Windfall,” National Endowment for Financial Education.
  2. https://www.marketwatch.com/story/heres-why-90-of-rich-people-squander-their-fortunes-2017-04-23
  3. Fortune’s Children: The Fall of the House of Vanderbilt
  4. Study from the National Endowment for Financial Education.

About the Author

Mike Alves is the Managing Director, Founder of Vida Private Wealth. His interest in wealth management began when he was 14-year-old scholar and read "What they don't teach you at Harvard Business School" by the legendary entrepreneur and business author Mark McCormack. Mike felt a growing need to make a difference in other people's lives, which ultimately lead to founding Vida Private Wealth.