The #1 Reason Why 70% of Wealthy Families Lose All Their Money

your kids your grandkids they're all gonna be broke it doesn't even matter if you're rich how do we fix this it's Brian Preston the bloody guy oh I know there's a little shocking are there a little bit yeah but it's true I mean this statistics if you were a person watching the money guys show you're good with money that's odds are yeah is it a sum sure that's a given you know if you're following geometry you have to do that whole given you know stated thing yes if you were watching this show you're successful and unfortunately listen to these two stats 70% of rich families lose their wealth by second generation I'm gonna reframe that in Bohan so or 70% of wealthy people's kids spend all their money exactly alright here's another one seventy percent of family-owned businesses fail are sold before the second generation so Bo Hanson's 70 percent of folks who build up these amazing businesses to hand out for their kids is below the kids blow it guys that's this is a heartbreaking and here's another one because while we're throwing out stats let me give you the other side eighty percent if you depends upon if you look at the millionaire next door is 80% the next millionaire next door that Sarah dr. Stanley's daughter right just came out with that book in the last year her number is 86 percent 80 percent under Judge Thomas Stanley 80 80 percent then 86 under Sarah and I think Dave Ramsey even has a new book with Chris Hogan yep where they're number is around 80 percent of millionaires are first generation meaning they did not actually get anything from their parents so wealth is being created predominantly 80 percent of the time by people who don't come for money who am I making it despite what the public tells you first of all there's the first thing to get your head in check about is because I was reading some of our comments or something and somebody was talking about how all wealthy people are born into it and I was like do not know the numbers so if we have 80% of people who are wealthy are self-made and then we find out that 70% of wealthy generations are poor after the second third generation get through this is what we call the wealth wash cycle I made that up you like that I really like that that's surely you got that from somewhere I thought I made it up I mean yeah we could go check it ready good you google it somebody's probably quickly right now trademarking it because it's so dag I'm good but it is such a true statement that we make it and then second and third generation blow it so while your kids are daydreaming on how they're going to spend your money you might as well see if you can break that song so that's we're gonna do today we want to kind of tell you guys exactly what you can do to help hopefully set up the next generations for success so they have followed this trap know or an actionable plan on how we avoid this so let's talk let's just jump into this thing step one the first thing you got to open up lines of communication stop avoiding the money talk with family members you know we see this one all the time and we see it in a number of different ways but it's important you know it we all know that money is sort of a taboo subject yeah a lot of times parents for whatever reason don't want their kids to know either how well-off they are or maybe it's the converse they don't want to know how not well-off they are and we see that all the time and all that really does is create difficult times that are going to rear their head is just a matter if it happens now or at some time later yeah and I mean I just had this conversation with a client today on a call is that we're worried about her mother so I gave a whole laundry list of homework of things I needed to know so we could give them good advice so this communication needs to go down if you're the parents up if you're the children or no the adult children so start that and then talk early and often start having these discussions before you hit crisis mode yeah when you're in crisis mode everything is just intensified plus you you you have this element of emotion that kind of takes over versus if you pre plan and let this thing be part of a bigger discussion that you've already started you know really easy way to think about that is all the time we talk about you know and it's it's not you know this is the fact of life that as we age there's some cognitive decline things it's harder for us to remember it remember things it's harder for us to think through things if you wait until those types of lifestyle changes begin happening it's really really hard if you are the child to talk to your parent and if you're the parent it's hard to talk the child so you just want to do it before you get there before I talk about step two I do want to say I've already kind of hinted at this but I think it's worth repeating is that there's a good chance if you're successful your children and your grandchildren are already daydreaming not that they not an evil you know holding their finger addiction it's not an evil thing but they are definitely thinking about what's going to happen to your wealth over the years it'd be nice if their expectations tied into your full plan that's right so let's move on to step two let's disrupt the behavior that creates failure this is the timeline of things you can be doing all through the different stages of life so that you don't even have to worry about it being a matter of having a discussion and a passing on and just hoping for the best let's talk about what are these affirming behaviors you can do sort all through the ages so it doesn't matter if you have young kids if you have you know high school kids if you have college kids if you have adult children all these things can be done at any point in the stage of your wife so let's kind of jump into this let's start at the beginning kids under 18 if you've got kids who are under 18 you can help them understand the basics of how money works what do you need to be doing so that you kind of have these building blocks of knowing what creates success they already have a leg up is it if they have successful parents that should translate into some skill set it doesn't always seem to work that way and I think you know what I love about talking to kids early and often about finances you know it's okay for a fourteen or fifteen year old to not understand what a checkbook is or what a savings account or how it works or how to manage all of those things it's really difficult for that eighteen or nineteen year old going off to college or that 20 to 23 year olds starting their first job to have to admit I don't know how this stuff works how do I pay a bill how do i balance a checkbook those are things that it's just much better if you can teach your kids how to do that early on then having them figure it out later on so the first thing let's get them some skin in the game if you want to change their behavior let's let them actually experience what it's like to have money in their name so I always offer tell I tell people and I do this for my own - I have a high school child we do we offer a match strategy just like your employer is offering you a match on your retirement savings contributions I offer a match if you're a child of Brian Preston you get a match for money you save and invest that's awesome because what I'm trying to do is build upon the understanding of how important it is to have the army of dollar bills the next thing is get them excited about what that means I know I originally did a show for my 14 year old she's now a 15 year old but this was so powerful you guys know a 20 year old that invest $1.00 when they're 20 years of age and they let it work until they're age 65 and they assume that this money is you know working on a monthly basis and you're assuming annual rate of return of like 10% I know that's aggressive but we got a 20 year old yeah you can be very aggressive and think about like the S&P 500 or some very aggressive index that's out there and what that $1 for a 20 year old eventually turns into 88 down that's right but for a 14 year old that $1 has the potential of turning into 161 dollars by the time they're 65 that's example so you know 88 is powerful enough when you think about that just starting to save at 14 versus 20 years of compounding force that money an 18 year old that number is still a hundred and seven dollars you know so that's incredible if you think about that I'm always talking about the 88 times over just that two years for an 18 year old versus a 20 year old is worth a hundred and seven dollars versus that adh hours so it's important to let that army of dollar bills start working as early and often as possible right so compounding interest is definitely their friend open a bank account and have discussions on credit cards before they leave the house and go to college a huge one you don't want them signing up for a credit card for a t-shirt or bag of potato chips you really don't I mean your credit much more valuable than making that bad decision I think about this all the time like why parents don't do this oh no no I'm not giving my 15 or 16 year old a credit card no way they just know they're gonna do something crazy what are they they're gonna do when they're 18 it's either let them their peer pressure group is going to be there their social influencer group is who's gonna be giving the guidance right and you don't know how their friends are gonna look at money you at least know how user process and hopefully you can pass down that skill set and then speaking of passing down skill sets I think one of the things none of us becomes completely successful without the help of someone else I feel like you know Bo there's so many things I can look back on my life and I can think about that first great boss I can think about the first great client they can cook a chance on me and hired me I can think about the fact that I hired a great and employees or came a partner amount it's always if you can pass down that gratitude and that gracious heart and part of that is becoming charitable there really is something to is more powerful to give than to receive so if you can start passing that into your children I think no value it truthfully it will help them also with success because people who have a gracious and gratitude heartfelt heart I think they'd say thank you and people want to see those pimples succeed so start early and often on getting those kids to understand the value of charity you know I think another thing Brian that I've seen you do with your girls and I think it's just absolutely beautiful is you play what I like to call the skin in the game game you tell your kids if there are things that they want like your 15 year old who probably the next year's gonna want to be driving around instead of having pops drive her around she's gonna have some skin in the game she's gotta be saving up money if she wants to buy that first car I've heard you say before if they're troops that the kids want to go on or they want to go do some activity they have to have some skin in the game that is a fantastic way to teach your kids the value of saving and defer gratification it's differ between other people's money and your money won't let them understand the value of their money as soon as possible let's talk about kids that graduate college how do we plant that seed of financial knowledge by sharing wealth resources you know I've already talked about eighty eight times over you know this is your kids when they graduate college you got it once again get the power of compounding interest the power of your army of dollar bills that every dollar needs to have a plan you need to be a field general yep it's doing really incredible things but also like especially if your kids are graduating college they're probably curious about life and you can give them some legs up by giving them some inspirational books now in good financial management everybody who listens the money guys show knows I love the wealthy barber yep I love the richest man in Babylon millionaire next door and then this is a new one I've added because we're gonna have him on the show soon I've always been a fan of his matter of fact he's part of the inspiration of how I even started broadcasting over 13 years ago is how to think about money about Jonathan clones I think that he is to read his stuff weekly in the Wall Street Journal he now is you know brought a lot of that common sense good money management so it's something definitely to go look into and we're gonna have him right here on the money guy show and another great thing about sharing books and other voices with your kids is sometimes our kids don't listen to us sometimes we can tell them things over and over and over and over again it just doesn't sink in you may be amazed that you show them the millionaire next door and let them read about other millionaires and it's not saying anything that you haven't told them for their entire life but for some reason something clicks did you enjoy the behavior it's a beautiful thing to watch um if you do have because it happens you know if you have an adult child you've got them educated all indicators are that they should be out on their own but they're back in the house you know no judgement there but it is one of things you might want to consider getting them to pay rent or at least do something that adds to the household financial situation so so I'll leave it at that I want to talk about the next life stage and timeline that you can kind of give a positive influence on for good financial management and breaking the cycle of bad decisions is marriage of your children yeah maybe one of the biggest things that will impact the financial well-being of someone over the long term is the decision to get married and who you marry because it matters first I mean and this is gonna be a little uncomfortable but you need to be honest if you have done if you've set up like savings accounts for your children like a custodial account now they're an adult it's become their account or if you've set up some money maybe to help out with some of those big first-time purchases because those things happen we have clients that they're doing those type of things you do need to have a conversation with your children this explains hey keep those accounts in individual name only oh she don't commingle only once they're commingled under the eyes of the law it's now you know and unfortunately things don't always work and I always tell people you know it's just better if you if the children know what you kind of you don't want to put strings on stuff but you do want to make them have a full understanding of how the real world and the legal system works with those assets and look I get that that can be an uncomfortable conversation but realistically it shouldn't be uncomfortable because what you're telling them is looks honey sweetheart you're marrying this this man this woman and you're gonna spend the rest your lives together so it's never gonna matter that these assets stayed separate so if everything goes the way that you just know that you're certain it's gonna go it's not gonna matter if the assets are separate so it shouldn't be a complicated difficult conversation I'm going to come back I have another suggestion that's in part of step 3 for the the brand-new married couple but it really fits in more into step 3 than it does step 2 so I'm going to leave that little bit of a teaser that I've come back to I want to talk about what do you do when you get new estate documents drafted you know that is a common thing we just had a new tax law that went into effect in 2018 it's changed how estate taxes are calculated so there's a chance you might even have to go get new estate documents right on for your family while that ink is fresh you know are drawing in it in the knowledge is fresh maybe that's probably a better way of pinkest dry knowledge right ink is drying and the knowledge is fresh in your head consider having a family meeting yep I mean it's much better to do that stuff on the front end yeah you know I think what's so important is if you do get your state documents outdated I think it's important that you let your family know about that but we see this all the time make sure that your family knows where the most recent most updated documents are unfortunately we've had situations where clients or parents of clients or family members of clients have passed away and they said hey yeah we found a will but it was dated from 1997 and I know they said they did it but we haven't found the new one it just gets really really confusing so if you do have documents make sure that you keep a clean system you don't have a bunch of old wills old estate documents floating out there death is obviously a scary thing it's kind of a morbid thing to talk about but and disability because some of these you I have healthcare directions and other things turn it into a positive event figure out if you can do this over a nice meal or maybe do this before the nice meal you know you have a sit-down with the family and then you go do something really positive and affirming and building memories afterwards and then the last thing I just had a friend who asked me this is probably less than a month ago because hey I'm going to meet with the attorney creating some trust within the family you have any advice okay this is simple but this is so simple and common sense that you'd be surprised at how often it gets lost keep it somewhat simple do avoid complexity as much as possible because we all know at some point we're probably passed we are passing away there there's no way to avoid that and you don't want to create a sense of resentment if you've created some complexity that first of all is going to require an intimate relationship with attorneys and accountants and for no need I mean we see this all time of things that carry on with a tell for 20 years 25 years and you go wow it just doesn't make sense you know they had it this complex so pay attention you know it doesn't mean you get away from all complexity but make sure the situation warrants so I think everything should be made as simple as possible but no simpler that's not my quote that's actually that in this one this last one is not about us eight diagrams but it kind of is in the fact that I wanted to state that be careful because a lot of times when you meet with attorneys and financial advisors and and I even do this with myself is that you'll put age restrictions in your estate documents and that's perfectly fine but you also need to make sure there's some education going in with those age restrictions that you're putting on trust and other things because there's a lot of 40 50 and 60 year olds out there that are not responsible so age does not always translate into maturity there's a lot you know it goes the other way too there's a lot of 25 30 35 year olds out there that are very responsible and maybe it doesn't make sense to put hand on that so make sure your estate documents and your wishes do reflect the risk the kind of the person the individualized personalities of your loved ones and it changes over time so make sure that that estate document that you had that plan you had when your kids were seventeen years old it might need to look a little different when your kids are 37 years old it's just a different stage of life so it brings me to my final step step three 3-step things break the cycle and this is kind of a trifecta of how you break that cycle of having wealth get washed in and washed out this is bringing an outside voice bring in an expert I happen to know two guys that you know we resemble this and the fact that and you said it best bow you're talking about how sometimes a book you know or an outside person you could tell your children something till you're blue in the face you you know truthfully you can tell your spouse something you're blue in the face you bring in an outside resource all of a sudden it's all like this was newly discovered information so bringing in that outside conduit to have a good healthy discussion can be very healthy and also probably help save some feelings that you might be worried about being bruised or concerned that's all right so let's kind of go through this because this you could go back through that same timeline and there's actually some uniques things that can be added by having a professional or somebody that can be a conduit to step in and talk to your family with you and that's like with kids that are college age or younger you even said maybe a high school yeah yeah this is where you have those courtesy meetings if you're working with a financial advisor so that your financial advisor or somebody who's giving influence to your what's going on in your financial life can talk to your children about career opportunities you know those first savings opportunities how do you pick out a mutual fund how do you pick out stock open enrollment the very first time you know I think one of the things I have some dear clients that I love working with and they're the clients mother so grandma gives the kids some money and they you know she could they got some gifts last year and they said hey but I'd love for you to just meet with our kids and we don't want to be there we don't even know what you talked about just meet with them tell them what the how to do with this money talk to them about and what it can do what it can turn into and it was amazing sitting down with high school-aged kids talking about compounding interest talking about how the stock market works and even picking some investments that made sense it was awesome seeing the lights going and now the kids stay in touch with me hey how the houses don't hey was it's just it's really awesome to see them start to get excited those kids when they get to college and even beyond they're gonna be way ahead of their peers just in that knowledge this isn't in the show notes but I talked about it there's an addiction in America that there are no support groups for and it's the addiction to saving that's right and building financial independence aport groups for if you like to eat too much if you gamble too much if you're there's all kind of behaviors you can get addicted to that there's going to be somebody that helps you get through that that hiccup that's right when you start the habit of saving erling you recognize that army of dollar bills how powerful it is when it's working for you you get addicted to it and it but it's a positive thing you become an empire build right and that's why you don't see support groups for usually you see a lot of people that are just trying to be there so if you can encourage those behaviors a young age that's pretty powerful stuff and that that leads to you kind of alluded to this but I just want to come back to it think about you have a client and they having a child that's now crossed into that threshold of adulthood they had their first real job where they get retirement plans they get employer benefits what if they could have a tour guide to walk them through I bet you didn't I know I didn't have that I've shared with you guys my first investments out there in the financial world not a good choice so it'd be nice if they can have a tour guide to help foster that healthy relationship with the way they look at money with those first choices that they're making cuz unfortunately this is why it's great if you have an advisor relationship that really works well for you a lot of the folks that are willing to talk to 18 19 20 21 year-olds aren't the ones who have their best interest at heart they might have something that would sell to them or they might have something that they want to take advantage of if you have a trusted adviser relationship it's a great idea to bring them in to talk to your kids because you know that you can remove some of the risk that your kids might be experiencing otherwise next life event that you could probably bring somebody in to help the kids out when they get married you know I'm talking about teas are out there that's right think about if you could have somebody help out with credit cards that first house guidance because the mortgage brokers the real estate agents they want you to buy big and you know and sometimes he gets stretched where your house rich life poor it'd be nice if they had somebody who's in your corner about those things cash reserves I mean just how do you make the right decisions on any order of operations of your personal finances building those initial retirement assets because of the power of compounding interest there's even potential and we've talked about this maybe if you could give a course yeah to that do rate Wed couple of making good financial decisions at a young age that's something I know we've thrown around and don't be surprised to something like that doesn't show up at some point but it's still in development as you gonna speak and then remember when we talked about sharing those new estate documents you know the ink is still drying and you know it's fresh knowledge how cool would it be since it's already a difficult discussion if you could have somebody who can navigate those things whether it's the attorney who drafted it or your financial advisor that could definitely help you out through that tough situation that's exactly right I want to close it this is the big thing you've heard the stat I'll say it again because I think it's worth repeating and I know that modern media does a horrible job of educating people on the truth of this 80% of your millionaires out there are self-made in their first generation know I always that word self-made sounds they're rock generation they're first generation because it doesn't mean that they didn't get hell tour from the great boss a mint or something like that I don't like the word self-made but I will tell you it means that they are the first generation to reach millionaire status it's not because majority of your millionaire millionaires are not because they inherit it right the sad cycle is I've shared with you seventy percent blow that money by second generation ratio seventy percent of small businesses blow it by that second generation that stuff let's just in this wealth wash cycle we have you've worked way too hard on building this and having these successful habits why not use the three step process and just go beyond common sense and make sure that your children and your grandchildren are building a legacy that works just as hard as you did building those assets I think that's perfect I think if you don't have this conversation now whether it be with your parents or with your kids you might have a chance to so start now have the conversation and try to get in that 20% that is it first generation because I think that's awesome you know if I leave a bunch of money to my kids one day I hope that they're able to do something really incredible with it they're not gonna be another statistic you get to control that conversation you get to control that outcome one of the things this just hit me isn't even in the shownotes we have a lot of money got family members that are successful but they also they've kind of broken the trend they even have successful parents or maybe they're the money got family member is aspirationally building the right habits but they have a family member that they know that just needs some additional help you'd be surprised at how many people have come to us that their parents aren't up on technologies they don't do podcast they don't do YouTube they still bring them to us because they know that we're gonna try to it with this whole abundance cycle where we're trying to do the right things so feel free to reach out to us you know we're always looking to take the relationship to the next level our whole thing on the way we have built the money guys show and why it's been successful is we just give it away we totally investing you we give you this free advice free information with the thought that you're going to keep growing you're gonna keep being successful but at some point you're gonna get to the level of success you just don't know what you don't know and you're worried about blowing it with a big decision that goes wrong so you feel like you need to bring an outside source in to talk to you I want you to know that could be the money guy team the abound well team go check us out money guy calm abound well calm go the contact us page reach out to us and then bow if you're still in that aspirational side go to money guy calm and just give us your email address we have great content coming out also go to youtube and subscribe and we just we love this we're energized by you guys always following us and always being so vocal with sharing your ideas we're going to continue to create great content and be a part of your financial success

Channel: The Money Guy Show

Views: 46,729

Rating: 4.8104992 out of 5

Keywords: money guy show, debt, budget, cash, real estate, insurance, how to make money, save, credit card, compound interest, buying house, buy stock, success, personal finance, The #1 Reason Why 70% of Wealthy Families Lose All Their Money, how to build wealth, how to build wealth from nothing, money, investing, building wealth, how to save money, wealth building, financial freedom

Id: tNOgRVbg1Cs

Length: 26min 38sec (1598 seconds)

Published: Fri Feb 22 2019