One of the most common questions family business leaders ask: At what age should I tell my kids how much money we’re worth?
The answer? Not until they’ve reached the top of fool’s hill.
What is fool’s hill? It’s a symbol that represents life experience. It includes all the trials, poor decisions, hard work, achievements and sacrifice that shape us and teach us. At its summit, you find, flapping in the wind, the flags of experience, learning and wisdom.
To elaborate, I’ll tell you the disguised but true story of John, a second-generation member of a successful family business on the West Coast.
John was raised in a wealthy but not opulent suburb of a large coastal city. Though his parents owned and operated a successful construction company, John never really had the sense that he was any wealthier than his friends.
Yet his father had created hundreds of millions of dollars in net worth.
I interviewed John as part of a family governance and succession project. He was 30 at the time. I asked him when he learned that his family was wealthy. His answer surprised me.
He had been a 25-year-old graduate school student, studying teaching. At that time, he shared an apartment with three other students. His mom came to visit early in his first year and was, in his words, “disappointed by his living arrangements, to say the least.”
As she ended her shorter-than-expected stay, she said, “This place is a rat hole. You need to find a new apartment.” When John protested that this was the best he could afford, mom answered, “You can afford better. Much better. I’ll have dad call you tonight.”
Cue the deer in the headlights look on John’s face as mom kisses him on the cheek and gets in the cab.
John’s dad is the reserved, quiet type. Doesn’t say much, mostly grunts and gestures. By John’s recollection, the phone call that night went something like this.
“Hi son.” “Hi dad.”
“Mom says you’re living in a dump, need a better place.”
“I can’t afford my own place dad, I’m a grad student.”
“You can, John. It’s time you know you’ve got the money.”
Long awkward pause.
“How much dad?”
“Liquid? About $12 million”
Longer, more awkward pause.
John hung up the phone and sat down on his bed.
When I asked him how it felt, he said the news was shocking. And he felt a little disappointed that he hadn’t been told earlier. But then he realized what a wonderful gift he had just been given.
I asked him what he did once the reality of being a multimillionaire in his mid-20s set in.
He said he rented his own apartment. Rented. Didn’t buy one.
“Did you splurge on anything for yourself?” I asked, curiously.
He thought for a minute, looked down and said, “I guess I did get a little crazy.”
I thought, “Finally, here comes the real story. Ferrari, Aston Martin, Lamborghini.”
He looked up and said, “I spent $800 on a new mountain bike.”
At age 25, John had clearly reached the top of fool’s hill.
Everyone starts up fool’s hill. Everyone. Almost everyone reaches the top. But some never do. Some start up it when they’re 11 and don’t reach the top until they’re 35. Others start the climb at 15 and get up it before their 21st birthday.
Each of us climbs at our own pace and when we’re climbing, we don’t know it. Only those who have made the climb to the top can tell when others are still hiking. And only when we’re standing on the summit are we able to turn around and see how far we’ve come.
I’ve used the story of fool’s hill many times to help family leaders understand four things:
– There is no universal age when children are mature enough to handle important financial information.
– Each child has different strengths, weaknesses, skills and talents. Each experiences life differently, and therefore matures at his or her own unique pace.
– Parents must objectively judge the maturity of each individual child,to decide whether he or she has reached the summit of fool’s hill,and share sensitive information accordingly.
– Parents must seek other, more objective points of view when judging the maturity of each child. They have seen so many of the dumb teenage mistakes and foibles (which they also had, but their kids didn’t see) that they tend to discount stable, mature behavior with memories of boneheaded decisions.
I suggest four important areas of life when judging if a son or daughter has reached the top of fool’s hill.
– Money: Are they financially independent? If not, are they heading that way? Do they manage debt? Do they understand personal finance?
– Attitude: Are they generally grateful for what they have? Do they often complain that they don’t have enough of this or that? Do they express thanks often?
– Career: Have they kept a job for more than a year? Have they been promoted? Do they have a five-year plan? Do they enjoy what they do? Are they good at it?
– Education: If they have not yet finished formal education, do they have a specific plan? Have they achieved good grades? Have they sacrificed for schooling?
Telford is a senior consultant with OMBI Consulting and a guest lecturer at Harvard Business School’s Executive Education. He was raised in Costa Mesa, El Toro and Mission Viejo and works with companies in Orange County.
