This episode of The Sustainable Business features Randy Fox from the Planned Giving Center. Randy’s going to help us think about how we can use our philanthropic activities to help teach our children money skills they can use throughout their life.
Here’s some of the topics we’ll cover in this episode:
- Why children of wealth holders are fortunate and how that thought process can be applied to teaching money skills.
- Understand that money is a very highly charged subject in most families.
- Why parents need to be talking about money skills to their children at a very young age.
- What to do if parents don’t support a charity their children are excited about.
- What organizations you can go to for more information about using philanthropy to teach money skills.
Narrator: Welcome to the Sustainable Business Radio Show on podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. The Sustainable Business is all about creating great outcomes.
Here’s your host, certified financial planner, student, entrepreneur and private business expert, Josh Patrick.
Josh: Today’s podcast features Randy Fox, the editor-in-chief of the Planned Giving Center. Randy has been active in helping people with their personal philanthropic activities for over 20 years. He’s known as one of the true thought leaders in the philanthropic world. I’ve asked Randy to visit with us today to talk about how a business owner can combine philanthropic thought with teaching children age-appropriate money skills.
Let’s get right to it and visit with Randy for a few minutes and find out what his thoughts are.
Hi Randy, how are you today?
Randy: Hi, Josh. I am great. How are you?
Josh: I am doing just about perfect myself, thanks for asking. Let’s jump right into this because it’s kind of a morass of a topic. How does philanthropy fit in with teaching children money skills?
Randy: Well, it so happens you picked one of my favorite topics, Josh. I’ve been a believer for a long time and have read a lot of anecdotal evidence and have talked to a lot of other professionals about this very subject. It’s just a wonderful way to teach children about the benefits of wealth that isn’t theirs. It allows them to realize (1) that they’re fortunate. You can use it to apply teaching money skills, investment skills, spending skills and discernment skills with the money that’s not theirs. And you can teach them to give back to the community at the same time. I can think you can kill a lot of birds with that same stone.
Josh: You just hit on three different areas which is “money that’s not yours”. Why is that important versus money that is yours?
Randy: Well, money is probably one of the most highly charged subjects in most families. In mid-wealthy to very wealthy families, often you see an attitude or a profile of entitlement where the children think they’re going to receive money and have expectations around what they’re going to do with it and how much they’re going to get. It can have a very negative effect if the parents aren’t careful in monitoring that path.
With the family gathered around philanthropy, there’s money set aside to go outside the family, to places in the world where it’s needed, whether it’s to the local food pantry or to the little league team. It doesn’t really matter. What matters is that it’s not the kids’ money for themselves. They actually have to think about people other than themselves. It becomes a very strong emotional, psychological tool to teach kids money skills.
Josh: What kind of conversations would you recommend that parents have with their children about philanthropy and money skills?
Randy: That’s a great question. First of all, let’s start with the very basics. Parents need to talk to their kids about money. I’ve often said and I’m not the only one to say this but parents would rather talk to their children about sex than money and they don’t talk want to talk about sex. So, money is often taboo in households. I think, step 1 is to overcome that taboo. That means that parents really have to understand their own relationship with money and that often requires work because husbands and wives often differ. If they’re wealth creators, their attitude is different than if they’re inheritors so there’s a lot of dynamic that goes on.
But first and foremost, let’s start the discussion. The challenge is to be open. The challenge is to be honest. With younger kids, you have to have your discussions kind of weighted towards age-appropriateness. Young children really don’t understand amounts or numbers that well to know a thousand is different than a million is different than 10 million. That’s not as important at young ages but as children age you can age the conversation appropriately.
Josh: You mentioned just a little while ago about moderate and heavy wealth. What kind of money, using real dollars, do you think a family needs to have before you see philanthropy as a teaching tool becomes effective?
Randy: Great question. I don’t think there’s any number. Most families in the United States give. I think it’s 97% or 98% of the families in the United States give and the 2% or 3% that don’t give are probably the people that are living on the street and can’t. So, whether your income is $50,000 or your income is $50 million you can still shepherd your children along in the giving process, whether it’s putting money on the collection plate at church or doing acts of charity by volunteering, money is not the issue.
Josh: What do you tell parents if their children are really excited about supporting a charity that the parents don’t really like a lot personally?
Randy: This is very often the case, I think. Again, some of this depends on the age of the kids. But I think it’s very important that children’s beliefs are heard and honored. Parents don’t have to agree.
I think they should, again depending on the age, ask the children to justify why they want to give to a certain organization, what their thought process was in picking the organization. That really helps the child develop their own individuation. They’re not behaving as parrots of just following what their parents did. They’re allowing themselves to become their own unique person and finding out the things that they believe in that are important that might be completely different from their parents. This is a challenge for parents because we all want our kids to believe in the same things we do.
I do think it’s possible for families to talk about what the values of the family are and develop their core values and their core mission and see if the children’s charities align with those values and mission. If they do, then so what if it’s different than exactly what the parents think. This is not done nearly enough. Parents often try to bully their kids and brow beat their kids into doing what they want so even the discussion is a difficult discussion. Most parents really aren’t equipped or have the tools personally to have those conversations. Parents kind of need to train themselves or get the help of someone who can help them/guide them in this conversation with their children.
Josh: That’s actually a really good point. So where would parents find that sort of information?
Randy: Well, there are a number of books. There are a number of professionals that are equipped to do that – people that have been specifically trained. Some are therapists, some aren’t. Some are professionals like yourself who’ve been through specific trainings in how to facilitate family conversations.
Josh: Okay and if I want to find somebody like that or find a book I could read, where would I look?
Randy: Well, that’s a good question. Roy Williams has written a couple of books called Preparing Heirs. There’s an organization called 2164 that has great materials for age-appropriate—2164 actually speaks how to empower the next gen in philanthropy so it’s the 64 year olds talking to the 21 year olds, but they actually go down lower than that in age. Tracy Gary has several books out on philanthropy and family. There’s a lot of others as well.
As far as professionals, there are some training programs in the country that the Heritage Institute is pretty good at helping train financial advisors on how to facilitate families. Legacy Group, out in Boston, and a few others around the country.
Josh: I’m assuming if you did a Google search, you probably could find people who can help you and books that would help with this situation?
Randy: Absolutely. And again, members of Advisors in Philanthropy, members of the Purposeful Planning Institute. If they can’t do it themselves, they’ll know someone who can, right?
Josh: It makes sense to me. Let’s switch gears for a second. Where do you think philanthropy fits in with our listeners who own businesses? “I’m so busy building my business, I don’t have time for it.” That’s what I hear all the time.
Randy: It’s interesting because as many business owners say that, they don’t really practice that. Most business owners tend to be very philanthropic and don’t think of it as philanthropy. They belong to the Rotary, the Kiwanis, the Lions. They belong to their church or synagogue. They have children on the little league team. They’re on the PTA or their spouses are on the PTA. Those are all charitable acts.
In light of that, having them expand that philosophically is not really that difficult. It’s just a matter of–business owners, most of them in my experience – and I know this is true for you, don’t think of themselves as wealthy even though they’re among the wealthiest people in the country. And so, they never think they have enough money to do these things and they do it in lots of ways.
Also, exiting a business using philanthropy as a strategy is one of the great ways for business owners to save tax and create a retirement income off of a liquidity event. So, there’s lots of ways the conversation can come up and be involved in the business owner’s life.
Josh: When you have a conversation with a business owner about philanthropy and they tell you that they really don’t have time or money, how do you help them discover that that’s not really true?
Randy: Well, I think it’s just a questioning process. Let’s see if I have this right. “Here’s what you say your income is and your family kind of lives modestly. And so, how come you don’t have money? I understand you’re busy at work but you do go home every night so you probably have a little bit of time. Where are you involved at in the community? What are the things that interest you? What are the things that drive you crazy in business that you’d like to see changed?” There’s lots of different approaches to having this conversation.
And again, I think philanthropy is not the only conversation. If you do that, it’s kind of the old saying “If the only tool you have is a hammer, everything looks like a nail.” I think that conversation has to be part of the larger conversation about your life, your future, where you are, where you want to go, and how do you want to get there. Does philanthropy fit in that picture? Does it fit for everybody? No. Absolutely, not. Can it fit for more people? Absolutely.
Josh: Again, if we’re going back to our business owners, how would you recommend they integrate teaching their children about their business? Is there a place where you see philanthropy for helping business owners teach their children about business and what makes a business work?
Randy: Interesting question. I know you’re aware of this – in most business owner families, the business makes up the significant part of the family’s net worth. It makes up a significant commitment of the family’s time. It makes up a significant amount of the family’s conversation, typically. It would not be out of the question to think that integrating the philanthropic conversation and watching the kids handle family philanthropy would be a great training ground to see how they manage things, how they manage their affairs, how they make decisions.
A good business owner can not only judge those skills but mentor their kids in the financial decisions – how they look at a charity, to see if it’s going to effectively use their resources and to tie that back to “Here’s how we would do it in the business.” So, if you’re trying to teach your kids to take over the business, it would be pretty easy to have something as neutral as philanthropy, give some guide posts as to how the children are developing in financial responsibility and decision making.
Josh: Yeah, that makes sense. What kind of potholes or mistakes would you recommend that business owners be aware of when they’re talking to their family or they’re thinking about using philanthropy as a teaching tool?
Randy: Like any other financial tool, I think it’s helpful for the business owner to have guidance. I think, a lot of times, the most common thing a business owner will say when you say, “What about charity?” is of course that charity begins at home. It can be a very risky conversation to talk about making a big commitment to philanthropy from the family’s standpoint without the children and/or spouse thinking that there’ll be less for them, or that they’re going to be disinherited, or somehow the businesses is going to go other than where they want it.
Like anything else, I think, you have to be cautious about how things are said when they’re said, and why they’re said. And having the family develop an overall mission and vision together alleviates some of that. But it’s easy for people to get worried that what they think they’re going to get, they’re not going to get and that philanthropy is somehow going to take money away from them. So, therefore it’s not a good thing to talk about.
Josh: Children are sometimes concerned that philanthropy’s going to take money out of their pocket. How do you recommend parents handle that?
Randy: First of all parents, as a family unit, have to decide how much is enough for their kids. There’s no right answer to that. If it’s the whole estate or part of the estate or nothing, it’s really up to the parents to decide what’s right.
Once they’ve reached that decision, again, my belief about open and honest family discussions is “Here’s what were going to do. Here’s why we’re going to do it. We’ve decided that this is the amount we think you should have and we’re going to make sure that no matter how we do our philanthropy, this is what you’re going to get.”
Again, what’s bad is the surprise. What’s bad is “I thought one thing and something else happened.” What’s okay usually is “I know what is expected of me. I know what to expect. It’s really their decision and their money.” This sounds easy. It’s very difficult because again children who have been brought up for 25 years thinking one thing, if all of a sudden, they hear something new, that can be difficult. If you start early in this conversation and that’s just what life is, then it’s usually not a problem.
Josh: Cool. I want to make sure that our listeners know how to contact you if they’re interested in more information. How would they do that?
Randy: The best way is probably directly to my e-mail. The best one there is email@example.com.
Josh: Well, that’s great. So if you people want more information, I’m assuming your okay with them e-mailing you?
Randy: Absolutely, happy to hear from anyone. I have lots of resources at my disposal, both from Planned Giving Design Center and the Charitable Giving Resource Center that I’m also involved in. I know most of the philanthropic planners in the country as you know, Josh.
Josh: Great. Randy, thanks so much for your time today. This was really enlightening and useful. I appreciate it.
Randy: Well, thanks for having me on, Josh. It’s always great to talk to you and I look forward to talking to you soon.
Josh: I hope so. Thank you.
You’ve been listening to the Sustainable Business Podcast where we talk about what you need to do with your business if it was to be here 100 years from now. If you like what you heard and want more information, please contact me at 802‑846‑1264 ext 2 or visit us on our website at www.stage2solution.com or you can send me an e-mail at firstname.lastname@example.org.
This is Josh Patrick and thanks for listening. I hope to see you soon for another edition of The Sustainable Business.