Yahoo Finance The No. 1 Reason I’m Not Passing Generational Wealth to My Kids
In America, success is largely measured by wealth, and if you earn enough to outlive you, you can pass it on to your kids. But is generational wealth a worthy aspiration?
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There’s a growing movement among millionaires and billionaires to give away their fortunes — but not to their children. By ensuring that your kids are born rich, the theory goes, you rob them of the tools they need to succeed independently.
GOBankingRates spoke to a self-made millionaire who adheres to this philosophy, because his ability to succeed was rooted in the fact that no one was going to do it for him. Here’s his take on the issue.
A Self-Made Man Succeeded Alone Because There Was No Other Way
Bryan Clayton is the founder and CEO of GreenPal, a marketplace that pairs lawn care professionals with people seeking landscaping services for their homes and businesses. The company investigates and approves every business it platforms, then contacts them on behalf of prospective local customers. Those customers can then compare quotes from nearby service providers without having to do the legwork of calling them individually for estimates.
Facilitating more than 9,000 bookings a day, Clayton has built the business into an industry leader — but his success stands on the shoulders of a lifetime of hard work. He started landscaping at the age of 13 before launching his own company, Peach Tree Inc., which he built into a business with 150 employees and $10 million in annual sales. He later sold it and used the proceeds to start GreenPal, and his tech start-up now commands $30 million a year.
Today, Clayton is a millionaire, but that doesn’t necessarily mean his kids will be. Every dollar of the family fortune came from his relentless hard work and perseverance — and if he just hands it over to them, what incentive would they have to build something of their own?
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Inheritance: Gift or Burden?
From Clayton’s perspective, his kids can inherit a big pile of money or the skills and mindset needed to succeed on their own — but not both.
“I’ve worked hard to build my company from scratch,” he said. “And while I’ve accumulated wealth along the way, I believe in the importance of instilling the values of hard work, resilience and financial responsibility in my children rather than simply handing them a large sum of money.”
In his mind, holding back the money gives them something much more valuable in its place. “By not passing on my wealth directly, I hope to encourage my children to strive for their own success and build their wealth,” said Clayton.
‘The Greatest Gift We Can Give Our Children’
Clayton insists it’s not about whether his kids deserve an inheritance or whether he wants to give them a leg up. His decision is rooted in his belief that money for nothing brings out the worst in people.
“In my experience, inheriting wealth can sometimes create a sense of entitlement and complacency,” he said. “This isn’t about withholding resources; rather equipping them with the skills, knowledge and ethic to create their own legacy.”
Wealth brings power, and power comes with responsibility. Clayton believes that if you don’t earn the money, you get all the power but not the responsibility needed to wield it wisely. Most importantly, he thinks that a big inheritance can inadvertently become an impediment.
“The greatest gift we can give our children is not wealth in the material sense, but the capacity to create, manage and grow their own,” he said. “There’s an old adage I hold dear: Give your children enough where they can do anything, but not enough where they don’t have to do anything.”
Clayton Is in Good Company
Clayton’s favorite quote comes from one of the world’s most storied wealth generators. In a 2021 letter to his shareholders, Berkshire Hathaway CEO Warren Buffett wrote, “After much observation of super-wealthy families, here’s my recommendation: Leave the children enough so that they can do anything, but not enough that they can do nothing.”
Buffett has pledged to give away nearly all of his massive fortune, which Forbes says is currently worth about $113 billion. He’s setting up foundations in his children’s names, but he does not believe in generational wealth as a legacy.
In 2013, he told a journalist, “The womb from which you emerge determines your fate to an enormous degree for most of the seven billion people in the world.” He’s spoken at length about what he calls the “ovarian lottery” and how the least gifted children of the rich have much better prospects than the most gifted children of the less fortunate.
Like Clayton, Buffett doesn’t think he’s doing his children or grandchildren any favors by punching their prenatal Powerball ticket — and these two men are hardly alone. The long list of successful people who have said they have no plans to leave their fortunes to their posterity includes:
Bill Gates
Laurene Powell Jobs
Elton John
Simon Cowell
George Lucas
Mila Kunis and Ashton Kutcher
Michael Bloomberg
Gordon Ramsay
Sting
Mark Zuckerberg
Gene Simmons
Jackie Chan
Daniel Craig
So what do you think? If you amass a fortune in your lifetime, do you plan to leave the lion’s share to your kids?
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This article originally appeared on GOBankingRates.com: The No. 1 Reason I’m Not Passing Generational Wealth to My Kids
