IT COULD BE THAT I’M JUST FEELING CURmudgeonly because at this writing I’m eight months pregnant and not very comfortable. At the moment my sympathies are with the whale, not Jonah.
That grumpiness extends to a recent symposium about the benefits of philanthropy to the young inheritors of family wealth, the future scions of their families’ foundations. The arguments were sent forth, much like the Titanic, with an unshakable faith in their unsinkability. Three basic benefits were assumed: that early exposure to and participation in philanthropy teaches the young family members about money and finances, that it teaches them responsibility, and that it brings a family together.
I’m here to remind you that the Titanic sank, and that while a few survived, most drowned. Similarly, while these virtues of early participation in family philanthropy may be quite real for some, more often than not the benefits are illusory and their pursuit can actually have unintended negative consequences. (These observations are drawn not so much from our own family foundations, which haven’t pursued the “early participation” model, but by the observations of others that have.)
Let’s start with the first purported benefit: learning about finances. The astute individual who is interested in finance may well benefit from participating in a foundation’s finance committee. The attentive can hope to attain a level of familiarity that lets them look intelligent as they chat with the financial professionals who seem to infest the cocktail party circuit (at least in New York). But mostly, understanding of financial markets and practices is not a correlate of having responsibility for large sums of money. Instead, such responsibility, if prematurely given rather than earned, seems to engender a false sense of security. I’ve seen such individuals fooled over and again by bogus performance data, bamboozled on fees, or misled on balance sheets and income statements.
If you want your children to learn about finance, try some of the following:
- talk to them about markets and economics;
- get them to read the second and third sections of The Wall Street Journal (or Red Herring, if they’re interested in technology);
- have hypothetical (or very small real) trading accounts and track and discuss the experiences, good and bad;
- invite over for dinner people who are finance professionals who can talk about the games played in the industry and the challenges of investing well;
- have them take one or more accounting courses; and
- best of all, encourage them to get a real job in finance, even if only for a short while.
Nothing teaches like experience and exposure, and particularly when it comes to money, the more professional that experience, the better. And nothing seduces like thinking you’ve done something when in fact all you’ve done is listen to smooth presentations. If you must have your children on a finance committee, make sure that there’s at least one hardboiled professional who also serves who will ask the tough questions to puncture the rhetoric and let them see how complicated it all can be.
The second claim is that giving money away teaches responsibility. I must confess, I’m skeptical. If individuals are responsible, it’s for other reasons, not because they gave away money that they didn’t earn. To the contrary, giving money away at an early age tends to breed not responsibility but an unattractive self-importance, a false sense of significance that stunts personal development in the shade of a larger (and appropriated) family identity. Too many such individuals are heavy on reasons why they should be important (i.e., because their family is) and light on real personal achievement and thus on any effective sense of earned personal significance. Sadly, such people also tend to be not exactly in touch, whether in human relations or the economic realm, with the necessary constraints and grounded expectations that most people learn in Reality 101. Particularly in our culture, as my dad recently noted in passing, people tend to be like airplanes—they only really take off if they’re heading into some wind. If life’s too easy, if too much can be taken for granted, if there aren’t the challenges that develop character and maturity, true responsibility can be harder to come by, not easier.
Finally, there is the claim that the simple act of giving generates a sense of family togetherness. There are certainly many families that find that to be so, but again, context is critical. If the donor has no particular philosophical vision that he wants followed (or if the children are largely in accord with the donor’s views), such a venture, particularly once the children are older, can be a great mechanism for dialogue, discussion, and the development of mutual respect. After all, the best philanthropy comes from those who bring something to it, rather than from those who expect to get something from it.
On the other hand, problems occur if there is a strongly expressed donor vision to which the trustees feel obligated, and a generation comes along that largely thinks it knows better or simply wants to use the funds for very different purposes. This is a recipe for great tension, and on occasion for the splitting up of foundations as a last ditch effort to achieve renewed family harmony.
In short, as in all things concerning philanthropy, intentions may be good, but results are far from guaranteed. Use your foundation if you must, but understand that there are better ways to build knowledge, develop character, and create the ties that bind. Know your children, their strengths and limitations on their way to full maturity, and recognize honestly the purposes, constraints, and temptations that come with involvement in your family’s foundation.
Including your children can be done well, but to be done well, it must be done wisely. Remember, it’s an ice field out there, and even the most unsinkable ships have tiny forgotten rivets that can pop and lead to unanticipated disaster. So start with short trips in shallower water, see how it goes, and cross the Atlantic only when you’re certain of the seaworthiness of your craft. As with most things, there will be time.
Heather R. Higgins is Director of The Randolph Foundation in New York. Shortly after this article was finished, the world welcomed with joy Randolph Richardson Higgins (nine pounds, two-and-a-half ounces).
