How much money should I leave behind for my children?

 

This is a question that I was asked by a client recently, and as with many such questions, it’s a complex one to answer as it depends on your own personal views and values, as well as the personality and capabilities of the child.

When I thought about it further, I came to the conclusion that it’s actually the wrong question. You have no idea when you are going to die, what your future circumstances might be, how much wealth you may have, and what sort of person your child may grow into. I would therefore suggest that a much better question is to ask, “How can I prepare my child to make good decisions around money, to use it creatively and for the good of him or herself and society, and to avoid the bear traps and leeches that populate the financial world?”

There is plenty of evidence for the damaging effects that too much money too soon in life can wreak on young lives. Vorayud Yoovidhaya, the grandson of the founder of Red Bull was accused of the hit-and-run death of a police officer whilst driving his million-dollar Ferrari, and reportedly used his wealth to buy off the officer’s family and avoid prosecution. Brandon Davis, 32 year old oil heir and friend of Paris Hilton, is a regular in the tabloids for drug infringements and alleged nightclub brawls. Prince Pierre Casiraghi, son of Princess Caroline of Monaco, was accused of being “completely obnoxious”, insulting models and swigging from a $500 bottle of vodka after a brawl at a New York nightclub that left him in hospital. There are plenty of other examples.

 

For parents trying to deal with these excesses, views also vary. Gene Simmons, bass guitarist with American group KISS and reportedly worth $300 million, reportedly told CNBC “…in terms of an inheritance and stuff, (my kids are) gonna be taken care of, but they will never be rich off my money. Because every year they should be forced to get up out of bed, and go out and work and make their own way.”

 

Bill GatesMicrosoft founder Bill Gates feels similarly. He said “I didn’t think it was a good idea to give the money to my kids. That wouldn’t be good either for my kids or society.” Instead, he and his wife Melinda created the Bill and Melinda Gates Foundation in 1994, which today has assets of over $37 billion.

 

 

Movie star Jackie Chan does not plan to leave his millions to his son, Jaycee. He told a reporter “If he is capable, he can make his own money. If he is not, then he will just be wasting my money.” Contrast that approach with young Suri Cruise, daughter of Tom Cruise and Katie Holmes, who at the age of six reportedly had a three million-dollar wardrobe, and whose mother was apparently planning to surprise her daughter with an eight foot, $24,000 Grand Victorian Playhouse for Christmas, complete with running water, electricity, and extensive landscaping.
These are, of course, examples from the extreme end of the wealth spectrum. Nevertheless, the range of sentiments which are expressed can apply to all of us who have surplus funds that our children may one day inherit. So how do we prepare them for that day?

 

 

Inevitably, the good financial habits of children are likely to be built on the foundation of the practice of their parents. But sometimes, those habits aren’t always recognised.

 

I had a conversation with clients a few years ago when mother expressed a desire to give her three children a significant sum so that they could each buy their own homes. I asked her what was important about making this gift to her. She thought for a moment, and then told me that she didn’t want her children to struggle in the way that she and her husband had done over the years.

 

I reminded her of a previous conversation when we had explored her values in depth. At that time, she told me of her pride in achieving her financial success as a result of having to struggle and make good decisions in the tough times. This, she had said, had been the making of her.

 

I didn’t need to ask whether she wanted to take this away from her children. She saw the point immediately.

 

I quickly told her that I didn’t disagree at all with her giving money to her children – she could easily afford to do so – but she should firstly be clear about whether the children were ready to receive it.

 

George Kinder refers to these issues extensively in his book, ‘The Seven Stages of Money Maturity’. He describes the first two stages, Innocence and Pain, and explains how it is necessary as part of life’s journey to feel the pain before one can move onto the next stage, acquiring Knowledge. If the pain isn’t there, neither is the incentive to do the work necessary for personal growth.

 

Financial knowledge is essential on this journey. It is common for the very wealthy to enrol their children in financial education classes at an early age, enabling them to be equipped to deal with complex decisions around investment, accounting and trusts as well as to understand the role of philanthropy and community service in a well rounded financial life. It is a fact that the financial literacy of many young people leaving school today is extremely poor. Many have little idea about how a mortgage or credit card works, what the stock market does or how companies and governments operate. The child who understands these things early in life has a clear head start when it comes to understanding and dealing with his or her parents wealth.

 

Kids PiggyPerhaps the starting point for your child’s financial education is to revisit your own. Are your financial habits and attitudes appropriate and taking you where you want to go, or do you need some further coaching or education? Have you written down your own attitude to money, wealth creation, borrowing, saving and investing? When your child asks a financial question, are you able to give a rounded response?

 

Is money a problem for you, or is it the solution to a problem? How comfortable are you with your own wealth? If you have some issues in these areas, the chances are your child will grow up reflecting your views.

 

At Chesterton House we seek to work with our clients and their families to address these issues over time. If you don’t have a relationship with a financial planner who can assist you in this area, there are lots of financial information websites that are a good starting point. You need to make sure, though, that they aren’t just a cleverly dressed up sales message and that they are offering genuine education. Take your time to research and find a source of help that chimes with your own personal goals and values.

 

If you need any help on this topic, let me know. I’ll do what I can to point you in the right direction.

My Changing Vision

After years of prevarication, Andy has pledged to write a book.  Called ‘Letters to My Children’ the book is shaping up as a mix of autobiography, homespun philosophy, business experience and money advice, written as a guide to life for Andy’s five children. Here’s the next chapter, we hope that you enjoy it too.

My Changing Vision

I don’t recall when I began to develop my vision of my future business, but I suspect I was in my late teens. I remember lying in bed with pictures of the large organisation that I would ultimately preside over running through my head like a silent movie. I knew then that it was my destiny to build that organisation, and to that degree a large part of my life has been ‘living the dream.’

 The dream has changed, however, in the light of experience and practicality. I’ve realised that scale for its own sake is cloying, not liberating, and if a business isn’t liberating then what is it for? For me, it was never about the money. Money without freedom isn’t much fun.

As I’ve continued to learn, my vision has morphed and changed, usually to fit my current reality. The picture of a multi-layered mega-corporation gave way to that of a small, tight, highly personalised business, dealing with a limited number of exceptionally well serviced clients. I would make my mark one person at a time.

Game Changers 

But two things have happened in recent years that could yet change my game – and my vision – again.

 Firstly, I’ve learned how to let go. Many people have told me over the years that I needed to keep my finger on the pulse, trust no-one, keep control and retain the rights to everything.

 The only problem is, you can’t grow that way. There comes a point at which you simply cannot know everything that’s going on in your business, and when you reach it you’re going to have to decide whether to go paranoid, stop growing or find another way.

 I’ve found that giving people you trust free rein, allowing them to develop and implement their ideas, and doing everything you can to get out of their way, is much more rewarding for both of you. Of course, you run the risk that they will stab you in the back, steal your ideas or abscond with your customers, and you shouldn’t disregard these very real possibilities. There are things you can do to make them less likely to occur, and my approach has been primarily around creating teams that rely on each other to function, and staying close to key members of that team.

Tell the Truth 

But my biggest strategy to protect my investment in these situations is simply to tell the truth, and expect the truth in return. I prefer to start from the premise that people are innately noble in their motives, and that they will do the right thing. I think the people who work for me and with me know that if they decide to move on there’s not much I can do to stop them and we might as well sit down and work out how we can both come out ahead. In his seminal book ‘The Road Less Travelled’, M Scott Peck defines ‘love’ as the desire to grow the other person to be everything they can be, and suggests that the ultimate loving relationship is one in which the parties actively choose to remain because of the nurturing support that they enjoy within it, which they recognise as a major factor in successfully travelling their own road. That seems to me a really good way to run a business.

All of this is predicated on getting the right person in the first place. Over time I’ve learned how to choose people for my team who will prove to be trustworthy. The best way to do this is to follow your instincts about them, and look for the clues that tell you they are not what they appear. I write more fully about this elsewhere.

 The second major game changer is the rise of the internet. Suddenly it’s possible to have quite intimate conversations with large numbers of people all at once. If you have a message to get out there, this is a huge advance.

 Of course, the drawback is that everyone else with a message is trying to be heard too. That means that your message has to be of high quality and give value like never before, but that’s been a problem that businesses have grappled with since the world wide web was a gleam in someone’s microchip. It needs fresh thinking and new ways of working, but a business problem it remains.

 For businesses that are prepared to do the work (or just get lucky) the rewards can be astronomical. Even on wafer-thin profit margins, selling a few million downloads can be highly lucrative.

 More importantly to me, it means many, many more people are getting the message. Like I said, it’s never just been about the money.

 Perhaps my original dream wasn’t so far out after all.

With love,

Dad

If the cold gets through to my heart, I remember thinking, I’m dead.

After years of prevarication, Andy has pledged to write a book.  Called ‘Letters to My Children’ the book is shaping up as a mix of autobiography, homespun philosophy, business experience and money advice, written as a guide to life for Andy’s five children. Here’s the next chapter, we hope that you enjoy it too.

Gorgeous midwinter

It had been one of those gorgeous midwinter days when the air is clear as crystal and the sun lights up the snowy hedgerows like a vivid Christmas card. Except that now the relative warmth of midday had been replaced by the piercing cold dark night air as I rode home across Leicestershire’s icy roads.

The day had started so well. My school friend Gary Sleath (known to us all as Gaz) and I had set off from our home in Rothley towards Market Harborough, 20 miles and an hours ride away. I’m not sure who had the idea to go and watch the trials competition that was taking place outside of Harborough, but at the age of 17 neither of us needed much prompting and it didn’t take long before we were off, both of us perched on my recently acquired 500 Triumph.

Motorcycle Escapades

We’d already had a number of motorcycle escapades together. In late summer we had ridden our respective bikes – me on my shiny new Kawasaki S1, a ring-dinging 250 two-stroke triple, and Gaz on his elderly but smart BSA C15 single – down the A6 to the London Motorcycle Show, plodding along at the steady 50 miles an hour that was the natural cruising speed of his Beeza. On the return journey my machine had gone onto reserve tank, but we couldn’t find an open garage. Eventually we came across a forecourt with a cash operated dispenser, taking pound notes at a time. My proud piece of Japanese super technology took exactly 2 pounds worth, whilst Gary had to stop at 96 pence, unable to squeeze the last few drops of fuel into his tank. That’s progress for you.

But today we were on a different mission, in a different climate. The sun was shining as we rode to Harborough, and we set about finding the trials competitors on their lightweight off-road machines. As we headed out of town, we realised that the ‘trials’ – tests of low speed skill and balance across rugged terrain – seemed to be taking place in several different locations at once. Brightly coloured riders and machines appeared ahead, behind, to our left and right, disappearing again behind the hedgerows.

We cottoned onto a couple of machines as they made their way along a country lane, in that curiously intense manner in which motorcyclists proceed when they are driving on snow covered lanes. Their machines were eminently more suited to the conditions, my Triumph having low set handlebars in road race style, although the power delivery of the low revving Triumph helped provide the illusion of safety. It felt good.

Machine failure

I don’t recall all of the events of the day, but I do remember that my machine gradually started to fail. The Triumph hadn’t been the wisest purchase that I’ve ever made, but at 17 I couldn’t see the folly of my ways, and this just seemed like another part of the adventure. It’s faltering coincided with the light gradually fading as the early winter afternoon turned into dusk, and the temperature started to drop.

We made our way back to Desborough. It seemed clear that my machine was not going to get us home, and we needed help. As it got darker and colder, we both crowded into a public phone box and phoned home.

The more I think about it, the more occasions I can recall when my dad bailed me out. Having had similar experiences with my own children since, I now understand how he would have felt to be called away from a nice warm fire on an icy winter evening by his errant child.

But still he came. And as we waited, the night closed in, the temperature continued to fall, and our spirits ebbed away with it.

Getting colder

Gaz was getting quite chilled by now. Whilst I had been wearing leather trousers which had retained some heat, he was wearing denim jeans which didn’t offer much insulation. It hadn’t seemed to affect him up to now, but as we waited the depth of cold was beginning to become quite worrying.

My dad arrived with a bag of tools and an electrical test meter. I don’t recall what caused the fault, but he managed to cure it, providing me with another lesson in my motorcycle maintenance apprenticeship. The bike started when I kicked it over, and I wasn’t about to leave my prized possession alone in the outer wilderness of Leicestershire. I would ride it home.

Gaz sensibly took refuge in the passenger seat of dad’s car, promptly turning the heat on to maximum. I set off, now acutely aware of the 60 mph gale that is the travelling companion of the motorcyclist.

The situation presented a dilemma. The faster I went, the more the wind’s icy fingers penetrated my clothing and numbed my fingers. Yet slowing down would prolong the journey further, perpetuating my exposure to the cold, and I needed to get in to the warm.

Exhilarating aliveness

As I rode through the blackness, and despite my extreme discomfort, I felt an almost exhilarating sense of aliveness. I was battling to get home through conditions that would have stopped most people, exposed to the thrilling reality of the subzero icy blast, connected to the tarmac below me and aware that that connection might be broken at any moment by an invisible film of frost.

As I forged through the night, I could feel the cold penetrating my body. I imagined my heart’s core, a warmth in my chest that was maintaining me and needed to be protected. I started to feel that there was a real possibility that the cold might win. If the cold gets through to my heart, I remember thinking, I’m dead.

I’ve never been so cold at any other time in my life. In fact, I’ve never come anywhere near to being so cold, and I wouldn’t want to go there again. The remaining events of the day are something of a blur, but needless to say I made it home and was soon wrapped up in what initially seemed to be a very cold bed. It was three days before I had recovered sufficient energy to return to work.

Knowing my limits

Whilst I wouldn’t want to repeat the experience, I did learn a lesson from it that I’ve carried through my lifetime. I learned what my limits are, and how much we are capable of when circumstances become extreme. Coming within sight of the boundaries of my endurance gave me a sense of how deep those limits are, and that has given me confidence when I’ve faced challenging situations ever since. I’ve known that, however hard I’m trying, I’m still a long way from experiencing that extreme, and there are plenty of reserves to call on yet.

As a parent, I have mixed feelings about exposing you to such experiences. My natural instinct is to protect you from harm, and to remove the possibility that you might look your own mortality in the eye.

And yet, such experiences are great teachers, and if you don’t know how far you can be pushed you’ll never know whether you’re using all of your potential.

In addition, the sense of exhilaration that I experienced that night in early 1975 as I battened down against the conditions that could kill me was something that I wouldn’t want to deny you, even taking into account the risks. Until you’ve looked death in the face, you won’t know what it means to be alive.

Life is to be lived. My advice is to live it.

With love,

Dad

The Curse Of Reasonableness

 After years of prevarication, Andy has pledged to write a book.  Called ‘Letters to My Children’ the book is shaping up as a mix of autobiography, homespun philosophy, business experience and money advice, written as a guide to life for Andy’s five children. Here’s the next chapter, we hope that you enjoy it too.

The Curse of Reasonableness

“Don’t you dare put the f***ing phone down on me!” demanded my customer.

 Click. Dialling tone.

 We come from a reasonable family. None of us like to hurt anyone else’s feelings. I can remember many times when each of us has agonised over whether we’ve said the right thing, whether the other person will be offended or get the wrong idea. And it’s a characteristic that I applaud.

 If you are reasonable, it’s hard for people to argue with you. And the moment that your conversation turns into an argument is the moment that the argument is lost. As soon as someone digs into their position and their tone changes from “convince me” to “I’m going to convince you!” everything that they utter is more likely to prove to them the validity of their case and close their mind to the merits of yours. And a closed mind says “no!”

 That’s why I’ve found that it pays to be reasonable, and to be seen to be reasonable. If you are going to make progress with your points and carry the day it helps to demonstrate that you aren’t irretrievably attached to them. So you’ll hear me saying things like, “Now I can’t be certain about what I’m about to say, but this is my understanding. What do you think?”

 It was Socrates who said, “The more I know, the more I realise that I know nothing,” and that’s been true for me, too. In our contemporary information rich, multifaceted and multi-opinionated world, what you know can only ever be a tiny fraction of what there is to know. My advice is that, even when you think you know the answer, be open to learning. You will invariably find that there is something that you missed.

 There are times, however, when reasonableness can be a curse. Every now and again you will come across someone who is completely unreasonable. Their unreasonableness may manifest itself as a complete unwillingness to give your views and opinions any credence whatsoever, or it may show up in the form of a person who thinks that shouting and aggression is the way for them to get what they want.

 The problem with the first of these is that they often masquerade as perfectly reasonable people. Gavin Walters was one of these.

 Gavin approached me because he had some money to invest, and he and his wife came along to meet with me to discuss their situation. He wanted to plan for retirement, he told me, and to make the best use of the money that he had available. He explained that he had chosen our company specifically because we worked on a fee basis, and he didn’t trust those advisers who operated solely on commission. It sounded reasonable enough.

 The problem was, when it came to accepting the recommendations that we had made after spending many hours creating his plan, it became obvious that telling us that he wanted to pay a fee and actually extracting money from him were two different things. He challenged everything that we had proposed, wanted to review every recommendation, and raised detailed questions that examined the minutiae of our advice. I now question whether he ever had any intention of going ahead. He certainly didn’t want to pay to do so.

 On reflection, the signals were there at an early stage and I failed to acknowledge them. My advice to you if you want to avoid such situations is to test the other person’s reasonableness before you enter into a relationship with them. I’ve learned that it’s perfectly okay to ask questions such as, “How will you know whether we’ve done a good job for you?”, “What other information might you need before you go ahead with our recommendations” and, crucially, “How and when do you intend to pay for our services?” Rather than looking for reasons to enter into a relationship, change your mindset to one where you are seeking reasons not to. I’ve also found that asking people for money in advance is a great test of whether they’re prepared to honour their obligations.

 Of course, from Gavin’s point of view he was being perfectly reasonable. It was I who failed to spot that his view of reasonableness was significantly different from mine, and I’ve tried not to fall into the same trap since.

 The second form of unreasonableness, shouting and aggression, is much easier to spot. Mr Phillips demonstrated it in spades.

 It was when my main business was car insurance, and Mr Phillips had a reason to be upset. His car had been damaged several weeks before, and the insurance company were doing their best to give the impression that they didn’t care a fig. Mr Phillips didn’t understand the system, and his frustration was mounting. When he first came on the phone that frustration was reaching a crescendo.

 The conversation had started reasonably well, with him demanding to know what was happening with his car and when it would likely be repaired. I had to explain that, as the intermediary between him and his insurance company I couldn’t give him any information now, and that I was waiting to hear from the claims department. “You people have got my f***ing car and I want it back!” he demanded in a tone that showed he meant business, starting a verbal tirade that rapidly escalated in volume and degree of obscenity. I realised that I needed to deal with his aggression immediately if we were to make any progress.

 “I can’t help you if you are going to speak to me like that,” I told him.

“I’ll speak to you however I f***ing well like!” he shouted down the line.

“If you won’t calm down and stop swearing I’m going to put the phone down!” I explained as calmly but firmly as I could. When his next sentence began with “F*** “ I did what I had promised.

 Click.

 I’d been in this situation before. I knew he would ring back straightaway. He did.

 “Don’t you dare put the f***ing phone down on me!” he shouted down the line.

 Click. Dialling tone.

 When the phone rang again I got in first. “I will help you as soon as you calm down and stop swearing!” I told him as assertively as I could. “I am f***ing calm!” he yelled. I called his bluff and waited.

 And waited. There was silence. I wasn’t sure what was coming next. I heard Mr Phillips take a deep breath on the other end of the phone.

 “I’m sorry,” he mumbled. I paused before I spoke. “Apology accepted,” I responded. “I’m trying to do the best I can for you. Can we move on?”

 Unfortunately not all such encounters end this way. However, if you’re going to manage the situation you need to show that you have your own rules, and you are going to stick to them regardless of the other person’s position.

 There haven’t been many times when I have faced the threat of physical aggression from another person, which is why those occasions when it happened remain vivid in my memory. It was clear to me that the person threatening me believed that it was the way to get his way, almost certainly because that is what he had been taught when he was growing up. If I was going to deal with the situation, I needed to acknowledge his anger but to point out to him that it wouldn’t change the situation.

 On the most notable occasion, my protagonist was threatening to attack me and my property unless he got his way. I was scared of what he might do, and I told him so.

 “But even though I’m scared of you,” I told him, “it’s not going to make any difference. If you want to get what you say you want, you are going to have to play by my rules. If you don’t like that, that’s your decision. But I’m not going to change my mind, regardless of what you say or do.”

 As soon as I told him that I was scared of him, his anger started to dissipate. I had acknowledged his strength, but also tried to make him realise that if he used it, things would only get worse. When our conversation finally ended, I won’t say that we were the best of friends, but I had felt able to build a small bridge of understanding between us. I had felt his frustration, and had acknowledged that he was responding in the best way that he knew how.

 And, hopefully, he had started to realise that I was trying to be reasonable.

 With all my love,

 Your Dad

What’s The Point Of A Business?

My daughter, Debbie, suggested that I should write a book. I asked her what the book should be about.

 “Me! ” she said, just as enthusiastically as she might have done 20 years ago when she was five. Some things don’t change.

 So Debbie, here you are. Except that it’s not really about you, it’s about me, and my experiences. But it is for you. It’s also for your other brothers and sisters, the people who you love and their extended families. And if you don’t mind, I’d like to share it with the wider world. Hope that’s okay.

 What’s the point of a business?

 You might tell me that our business has occupied  a lot of my attention whilst you were growing up. What’s the point of having a successful business? Is it just to make a living, is it for self-glorification, is it about personal power seeking, or is it to be able to help other people? Or could it be about changing the world?

 I guess, in my case, the truth is it’s some of all of these. Our business has enabled us to scrape a living for the seven of us in our family over the last 30 years, and in recent years we’ve started to make some surpluses as all of our previous learnings have come together. I have enjoyed the kudos of being my own boss, and the freedom that it entails. But most of all, I have enjoyed helping others.

 And the first people that I want to help are my family. In the early years I wanted to provide for you, put food on the table, and enable you to have experiences that wouldn’t have been possible without money in your pocket. As you have all grown and matured, my wish for you is that you understand how to organise your lives, make a living, and be happy.

 These aren’t all mutually exclusive objectives. Making a living requires a certain level of personal organisation and self-discipline. One of my strongest personal values is freedom, and being able to make my own decisions and follow my own path in life has been a huge driver for me throughout my life. The paradox is, however, that true freedom only arises when there is a proper structure in place. Total freedom from rules is anarchy, and in a state of anarchy we are ruled by fear, and there is no freedom.

 Take, for example, the rules of the road. We live in a society where people can hop into their car, onto their cycle, motorcycle or horse, or onto the next passing bus and travel almost anywhere in the world that they desire. They can do this with a high degree of safety because of a sophisticated set of rules that govern the way that we use our roads. White lines, traffic lights, signposts, warning signs, rights of way, dual carriageways and all of the other paraphernalia of road travel don’t detract from our freedom, they increase it.

 I read that the world’s most creative people are highly disciplined in their lives. We might think of creatives as long-haired, bearded hippies wearing tie-dye togas and sandals (or at least we do if we grew up in the 60’s) but the reality is that truly creative people are much more likely to wear pinstripe suits and wear shiny shoes.

 Having said this, I have met very few people who have been able to exercise their personal creativity in a way that generates high income for themselves and delivers the personal freedom that has been my primary goal for most of my working life. I still have plenty to do, but I like to think that I’ve made a few inroads into achieving this goal, and as my children you are probably in the best places to judge whether I’m right.

 In my desire to see you all develop as truly independent, free thinking, creative and productive people in your own right, I am not under any illusion that you would wish to take into account anything that I, your father, might wish to tell you. After all, I never listened to much that my dad said, as I am sure he will confirm.

 Or did I? I used to think that was the case, but as I have reflected on my life, I realise that I actually learned a great deal from my father that I had never really acknowledged. Mostly what I learned was an attitude to life, a willingness to experiment and a desire to be great at what you do that hasn’t done me any harm.

 My coach, John Dashfield, pointed out that we cannot not influence people around us. Everything we do and say rubs off on others to a greater or lesser degree. We can either choose to use this influence to help ourselves and others to improve, or we can try to ignore our influence and diminish our power, inevitably diminishing those around us in the process.

 As you read through the following chapters I hope that you garner some ideas that help you to achieve your own goals in life, and ultimately to have the peace of mind and sense of connection to the universe which I believe is the ultimate goal of all of us in the final analysis.

 And don’t forget that, whilst these words make sense to me now, the chances are that when I read them again in 20 years time (or even next week) I probably won’t agree with very much. So if you disagree with them now, that’s fine! Let’s sit down and discuss it. I’d love to hear your view and be persuaded by it. That’s how we learn.

 With all my love,

 Your Dad