How to Prepare Your Kids for Wealth

Blog Summary

In "How to Prepare Your Kids for Wealth," Scott Donnell offers strategies to instill financial literacy in children, ensuring they manage wealth responsibly and build a lasting family legacy. With over a decade of experience teaching money skills to millions of kids and families, Donnell emphasizes the urgent need for financial education to combat rising debt and financial illiteracy among young adults.

Key Lessons from Wealthy Legacy Families

Focus on Creating Value First: Teach children that money follows value. Encourage them to create material, emotional, and spiritual value, fostering capabilities and confidence to succeed. This mindset wards off entitlement and promotes problem-solving and empathy.

Heritage Over Inheritance: Emphasize family values and stories over monetary inheritance. Prepare children to create their own wealth, avoiding the pitfalls of the "Lottery Curse," where unearned wealth leads to guilt and mismanagement.

Money is Not Evil: Educate children on the power and utility of money. Teach them to manage money effectively, distinguishing between its value as a tool and the dangers of letting it become a master.

No Allowance: Avoid giving allowance, which can demotivate children. Instead, implement a "Home Economy System" where children earn money through extra tasks, learning to manage and value their earnings.

Home Economy System: Establish expectations for unpaid chores, assign expenses children must cover, and provide opportunities for extra pay through additional tasks. This system promotes planning, earning, and saving.

Money Skills and Conversations: Teach the top five money skills—save, earn, spend, share, and invest—through practical experiences and family discussions. Encourage entrepreneurial activities and responsible financial management.

Roots and Wings: Foster interdependence, where children are capable and confident but remain deeply connected to the family. Plan regular family activities and maintain close relationships.

Donnell underscores the importance of financial literacy and the role of tools like the GravyStack App in teaching children good money skills. The Financial Policy Council (FPC) supports initiatives to improve financial education nationwide, aiming to empower youth to make informed financial decisions.

For more information, visit Financial Policy Council.

Blog Content

How do you teach good money skills to your kids? How do you create a strong family legacy for your kids and grandkids that protects them from becoming spoiled, entitled, anxious or lazy? How do you prepare the next generation for wealth? 

Over the last decade, I’ve taught money skills to over 6 million kids and families. We’ve helped countless families escape generational poverty, and we’ve empowered families to create true legacy for generations to come. 

But make no mistake–there is a war going on for the minds and financial future of our children. And the tide is not in our favor. 

A comprehensive education is not taught in schools, and parents have no roadmap for how to teach their kids about money. Student loan debt is approaching $2T and counting^[1], with graduates struggling to find the “perfect” job. Only 24% of 22 year olds are financially independent, despite most of their parents thinking they would be by that age^[2]. In 2022, the average debt for Gen Z rose by 40% in one year alone^[3]. And 76% of 25 year olds fail a basic financial literacy test^[4]. In fact, many young people have bleak outlook on the economy and believe that we are living in a time of “late-stage capitalism.” In a recent study, 41% of Gen Z said they don’t think they will ever be able to own a home. To many of them, saving money for a home and retirement is a futile endeavor. They prefer ‘radical rest’ and ‘enjoying today’ rather than focusing on preparing for the future. 

So what can you do to protect your kids and your family legacy? 

The globe was searched to find 100 wealthy legacy families with amazing kids and grandkids. These kids were kind, generous, hardworking, driven, financially sharp and prepared for wealth. They didn’t ascribe to the statistic that 90% of generational wealth was gone by the third generation. They didn’t believe in the common phrase “shirtsleeves to shirtsleeves in 3 generations.” They are doing it right. 

These families were studied for years, and we wrote a book on it called Value Creation Kid – The Healthy Struggles Your Children Need to Succeed. The lessons were taken and put into the GravyStack App – a gamified banking app and mobile game for kids and teens that teaches them good money skills. GravyStack is on a mission to help 50 million kids become financially competent, and help parents create a strong family legacy for generations to come. 

Here are 8 lessons learned from these Legacy Families. 

• Focus on Creating Value First 
  • The best families teach their kids to create value first, not money. Money is simply a store of value, and it can only be gained when value is delivered. Money follows value. Creating value is the fastest way for kids to gain the capabilities and confidence to succeed. And there are three types of value–material value, emotional value and spiritual value. What you create and produce for others creates material value; how you help others think and feel creates emotional value; and spiritual value is created when you help someone connect to something greater than themselves. A Value Creation Kid is warded against entitlement, spoiling, anxiety, laziness and victimhood. They become problem solvers, they find needs and fill them, they become empathetic, they take personal responsibility for their lives, they become better friends, and they have an abundant mindset. 

• Focus on Heritage, Not Inheritance 
  • Legacy families focus way more on what they leave IN their kids, rather than what they leave TO them. If you spend your life accumulating wealth for your kids without preparing your kids to create their own wealth, you set them up for all kinds of failure. It’s called the Lottery Curse – kids feel guilty, shameful and unprepared for an inheritance they did not earn, and that Imposter Syndrome makes them give it away or spend it frivolously on bad investments or other liabilities that hurt them even more. It can also ruin their marriages, estrange their kids, and limit their ability to create value. 
  • Heritage protects families from all of these problems. Heritage focuses on what it means to have your last name. It defines your family values that are memorable, and you tell family stories that embody each value. They constantly told stories of ancestors and stories from their own lives and praised stories of the kids displaying the values. “If you want to kill a culture, get rid of the chief storyteller.” Heritage is the habits, rituals and experiences that continue to bind your family together through the generations. These parents stopped doing everything FOR their kids, and focusing on doing things WITH their kids. They would pay to a point for car, college or career, but then they would stop. They gave monetary gifts at age 25, 35 and 45 to show that they loved their kids, but never enough to make them coast. 

• Money is Not Evil 
  • Wealthy legacy families very clearly teach their kids the power of money, the usefulness of money and the ability to master money before it masters you. The love of money is evil and if money is all you think about with every waking moment, there’s a good chance that it is your master. But money itself is a tool that can be used to create incredible freedom, help others, and create amazing opportunities and experiences for your family. The poverty mindset views profit as evil, money is bad, and those who have it must have stolen it from others. These families made sure their kids knew how to manage it well. 

• Allowance Can Lead to Lack of Motivation 
  • None of these families gave their kids an allowance. Allowance is linked to a lack of motivation and an aversion to work in kids. A kid will never spend your free money like they spend their own hard-earned money. And giving a kid money is the fastest way to keep the Bank of Mom and Dad open until they are 25, 30 or even 40 years old. Even if you pay allowance with chores, the kids still don’t connect money to value created. Lastly, some parents don’t pay their kids anything and just make them do chores. This means that their kids never learn to make and manage money at all, and the parents are stuck paying for everything for them. 

• Create a Home Economy System 
  • Instead of giving allowance to their kids, all of these legacy families created what we called the “Home Economy System.” This system is made up of the Three E’s–Expectations, Expenses and Extra Pay. First, set the Expectations of what your kids do for free at home without being asked (clean room, make bed, homework, brush teeth, dishes, trash, etc). Next, start giving Expenses to your kids that they need to pay for (we have 12 categories in the GravyStack App that are important, such as toys, tech, extra clothes, sports equipment, social outings, birthday presents for friends, cavities, gas and insurance, etc). When you pass off expenses, kids learn to plan ahead, they have an incentive to earn money, and you save hundreds of dollars a month to pay them. Lastly, you give them ways to earn Extra Pay around the house through Home Gigs (we have 55 in our app, things like mow lawn, clean garage, bathroom, organize closet, wipe windows, common areas, make a family meal, etc). This is how you get your kids to stop asking you for money for good. 
  • This entire Home Economy System is built into the GravyStack Banking App for families with home gigs that repeat automatically, weekly paydays, and even a printout for the fridge for parents of kids ages 6-18. 

• Money Skills and Money Convos 
  • These legacy families know that money skills are not learned at school–they are learned at the dinner table. They created a very clear process for their kids to learn the top 5 money skills–Save, Earn, Spend, Share and Invest. They talked about them around the table, they practiced them around the house, they brought their kids on work trips, they explained how they created value at work and how they made money. They have monthly family meetings where they explain every investment they are making, every charity they give to, and every key financial decision in the home. They teach their kids to earn first at home with gigs, then they teach them how to sell things around the house online for profit, then they have them do gigs in the neighborhood, and then they have them start their first business. One family allowed their kids to buy their phone any age after 12 (with restrictions of course), but they had to have a profitable business first to pay for it. Every dollar the kids make is split into save, invest, share and spend accounts (which are all part of the Money Machine in GravyStack). 
  • The top money skill that every legacy family focused on for their kids was sharing. A generous kid has an abundant mindset, they believe the pie can be bigger, they have a bigger view of the world and problems to solve in it. They created charitable trusts and donor advised funds for their entire family to steward and learn to give wisely. Generosity is the super power for raising strong kids. Kids must learn to make money, but they also must learn to make money matter. “You can’t take it with you, but you can send it on ahead.” -Randy Alcorn 

• Give Them Roots and Wings 
  • These legacy families wanted their kids to make it out in the real world. But ironically they didn’t like the word “independence.” Complete independence separates kids and grandkids from parents, and it fractures generations. Who wants their kids to leave home at 18 and never look back, move halfway around the world, never call or Facetime, never come to holidays or Sunday dinners, and they never see their grandkids? What these families focus on is “interdependence” where the kids are deeply rooted in the family and are powerful value creators in the world. They want kids who are capable, confident AND connected deeply to the family. They made sure of it with how they planned holidays, annual traditions and rituals, family meetings and giving meetings, proximity to older kids, even how they welcomed spouses. They gave their kids both family roots and wings to soar outside the home. 
  • These are just 7 of the 24 axioms that we teach in our Family Legacy Workshops, and I hope that you will take the time to reread and implement them in your home. You are never too old to begin applying these principles and building a strong family legacy for generations to come. 
  • The FPC has members with extensive experience developing financial literacy curriculum, conducting research, and influencing policy decisions related to youth financial education. For over a decade, the FPC regularly publishes cutting-edge studies examining best practices for financial education at different age levels. Our members actively participate in lobbying and advocacy campaigns to promote financial skills acquisition from an early age. With deep expertise across curriculum building, research, and policy advising, the FPC is strongly positioned to drive improvements in financial literacy education nationwide. We are committed to empowering youth to make informed financial decisions. 
  • What can you do? There are companies that are offering an antidote to the lack of financial education for our kids. GravyStack is a gamified banking system that teaches your kids to create value in the world they live in. Franklin Covey (NYSE: FC), provides curriculum and training programs for financial literacy. EverFi, a private SaaS company specializing in financial education modules for students. Acorns, a micro-investing app helping young people learn about and invest small amounts. 
  • Continuing to lobby for changes in financial literacy in America, investing in companies that are making important changes in this space, and joining FPC committees and events to increase financial literacy are going to be vital to making these changes happen and creating a better future for 50 million kids.