Pass on Your Wealth Wisdom

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I have a colleague who, at 30 years old, was able to get his family out from under student debt. Part of that success meant following a strict budget, with special funds for expense categories that reset each month. He tells the story of opening the garage door by hand, waiting for their “home fund” money to replenish. When the next month came, they bought a new garage door remote to replace a broken one.

Now, this isn’t a dramatic example, but it does strike a vivid picture: a young newlywed breathing steam on a cold morning, committed to his family’s financial well-being. The story is what his children (and colleagues!) will remember: Financial health takes grit and determination, but it is possible and real everyday people do it.

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My friend’s kids won’t know his debt-to-income ratio that year, but they will know the story about Dad opening the garage door and their parents celebrating paying off their debts. It’s become part of the family mythology and wisdom tradition.

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As money-smart people, it’s our privilege — and many feel our duty — to take part in philanthropy. But I think there’s also another dimension, what I call wealth responsibility: sharing what we’ve learned in building wealth through in-person relationships with people. It’s on us not just to write checks and forget it, but to share (and model) the methods that got us there.

Americans Are Anxious about Money

According to a recent survey, 77% of Americans are anxious about money. Maybe that comes as no surprise, because money is such an emotional topic, but think about it: We are the wealthiest country in the world, and three-fourths of us see money as a major concern.

Other markers of financial confidence — knowing not just how to earn and spend but to save and plan — are also less than encouraging.

78% of U.S. workers live paycheck to paycheck.
28% of Americans have no emergency fund at all; 25% do not have enough to cover three months of expenses.
Only 32% keep a household budget.
Specifically for young people, only 16% said they were optimistic about their financial future, and 54% were worried they wouldn’t be able to pay back their student loans.

Add to those troubling numbers the disorienting year that we and the markets have had in 2020. Financial confidence will be affected for years to come, as anxious people miss payments, hesitate to invest and suffer from job/income loss.

Think back to how you learned about wealth. That first job, that first lemonade stand or lawn-mowing business that put revenue, however small, in your pocket. You learned lessons there through experience, but also by one-on-one conversations with mentoring figures in your life.

Your relationships probably nurtured that first impulse to learn how money works, and that’s what wealth responsibility is about.

In a way, it’s the old “teach-a-man-to-fish” parable, except that I hate fishing, and I know nothing about it. What I do know is how to start a savings account, how to structure and keep a budget, how to clarify and plan for financial goals. My guess is that you carry some of this knowledge as well, and the burden is on us to pass that along.

Why We Don’t Pass on Wealth Wisdom

There are plenty of reasons we don’t pass on wealth wisdom in the way we should. Money is one of the most complex, emotional topics in the human experience, and it’s no surprise that we are reluctant to bring up the topic. Let’s look at some of the common objections.

I’m too busy earning it. I think this is at the root of a lot of our objections. We’re too worried about holding on to what we have to take a breath and pass on what we’ve learned. Our anxiety about money keeps us from helping others. The banality of this excuse should be obvious, but it’s hard to ignore.
It’s condescending. My entry into the profession happened in a conversation with a friend who was an adviser, as well as one of my peers. I’d asked a somewhat insightful question about life insurance despite no background in the field. She spent the time to encourage me and walk me through terminology and nurture my nascent interest. If she had walked away because of fear of condescension, that conversation would never have happened. She’s one of my best friends to this day.
They can just Google it. We might assume that young people in particular have a wealth of knowledge available online, and we couldn’t tell them anything they can’t find out via Google. Again, look back through your financial journey. You learned these lessons through modeling and conversations, at least at first, not by picking up The Wall Street Journal randomly one day. Also, just because there’s information online, and a lot of it, doesn’t mean much of it is wisdom.
I don’t know how to make that connection. I would argue that those connections are all around you, from work colleagues to relatives. There are also helpful programs you can support and maybe even get involved in. Tyrone Ross, adviser and director of community at Altruist, is starting his program Learn to Money to teach financial literacy in underprivileged schools. A quick online search can bring you to local mentoring programs put on by United Way, the Financial Alliance for Women and others. Opportunities are there, from the formal to the informal.

Wealth Responsibility – A Privilege and Duty

I’ve written in the past about wealth shame – the tangible alienation we can sometimes feel when wealth puts distance between us and the culture we grew up in. Wealth responsibility is another aspect of the same discussion, the responsibility we have to share our know-how and wisdom with the world.

Even the worthy activity of philanthropy can have diminishing returns for us. We get that unsatisfying experience we are simply “throwing money” at whatever problem comes our way, and we aren’t seeing the impact firsthand. We also are often helping people we don’t know in ways we don’t understand. We feel disconnected.

Wealth responsibility is about that need for connection — not just to sign checks, but to share some of the wisdom and experience that put us in a position to write those checks in the first place.

Making Wall Street Accessible to Main Street

I grew up in a quintessential Midwest town, went to college in a town even smaller and then spent the next decade in a Top 30 city. Food, culture, packed interstates. Today I choose a small-town life. We have B's Diner, a couple of churches and a bar in my town, and I like it that way. With each town, there are experiences unique to that population. But I’ve also been privileged to travel most of the world.

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Recently, I witnessed a conversation between my son and one of his friends. This friend, like most small-town-America kids, has had small-town experiences. They understand hard work, community, connectedness, but Wall Street is a place in the movies, not their lives. These two young men were talking about the stock market, and I was proud to hear Jake stumble through an explanation for a few minutes.

I jubilantly waited for a place to enter the conversation. Then it came, “How do I become a millionaire?” We talked about how the stock market works and how everyday people — even from our town! — are affected by it and can benefit from it. We discussed how 401(k) plans work and the enormous impact the employer match can have. This led to the biggest driver of wealth: saving. The earlier the better! Time is the greatest superpower and these young men have it on their side.

Total time spent: 20 minutes
Total cost: Nothing
ROI: Yet to be seen, but the friend learned something he’d probably never heard of, and my son cemented the lesson as he participated in the teaching.

Again, not a dramatic example, but that’s the point! Sitting on the couch with two teenagers on a Wednesday afternoon is the arena in which these deeper lessons are usually learned.

If we have a certain amount of wealth, we have learned some strategies and life lessons – sometimes hard ones! Wealth responsibility is about making wealth more accessible for other people by passing on these lessons.

Standing on Common Ground

New York Times best-selling business author Arthur Tjan writes about the importance of relationships in learning:

Studies show that even the best-designed mentoring programs are no substitute for a genuine, intercollegial relationship between mentor and mentee. … All this is to say that mentoring requires rapport. At best, it propels people to break from their formal roles and titles ... and find common ground as people.

Standing on that common ground is the beauty of this kind of relationship. Most of us remember what it was like to be a college student surviving on ramen and terrified of the future, and we can offer some insight on footholds and pitfalls.

Socrates said it with characteristic grit: “Employ your time improving yourself by other men’s writings, so that you shall gain easily what others have labored hard for.” To be wealth-responsible is to pass on these lessons we’ve labored hard for as an act of goodwill and out of gratitude for the breaks we’ve been given.

It’s simpler than you think, and the need is out there.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Erin Wood has over two decades of experience humanizing financial planning. As SVP of Advanced Planning at AssetMark, Erin leads innovation for new wealth solutions, secures strategic industry relationships and oversees a team of specialists who work directly with advisers and their high-net-worth clients. Erin focuses on delivering tailored strategies for estate planning, tax efficiency, retirement planning and multigenerational wealth transfer to help financial advisers keep up with evolving client demands.