“Shirtsleeves to shirtsleeves in three generations” is the oft-quoted adage. It’s been called a curse.
The adage exists in many other cultures: instead of shirtsleeves, it’s clog or rice paddies.
It stands as a warning to families: you make it, your kids spend it, and your grandchildren lose it.
But recently, the research that purports to prove this has been debunked.
Advisors are adopting a more positive view of family wealth and what it can achieve both for families and society.
It’s time to go one step further and turn the curse into a blessing.
To do that, we first must understand this “curse”:
The third generation of wealth carries risks.
– They grew up with plenty, while their grandparents grew up with little.
– They may not understand the journey of wealth creation.
– They have a very different psychology of money to the wealth originators.
Because of this, they may lack resilience and may not have as good an understanding of risk and reward.
An opulent lifestyle and poor decision making can the road to ruin.
How can families flip this narrative?
By three generations working together to compound their respective strengths.
The pattern works like this:
- First generation takes a certain approach
- Second generation wants to do it differently – “their way”
- Third generation looks at both and finds a middle path
My late father was a micromanager. My response to that was to over-delegate. My children learn from both of us to strike the right balance.
What is the difference between “shirtsleeves …” and the compounding formula?
In the compounding formula, parents:
> Allow their children the space to experiment and learn
> Give their children autonomy and choice
> Let their children individuate
> Communicate openly
> Convey the lessons of their experience in a non-judgmental way
> Tell stories – warts and all – to convey their values
> Remain humble, recognising they too can learn
> Allow the third gen to learn from the two previous gens
> Encourage a culture of stewardship (not ownership)
Of course, it takes two (in this case three) to tango. The rising generation need to maintain a healthy respect for the past, and reciprocate the good will shown to them.
The incumbent generation need to take the lead on this.
Done well, the third generation will understand the journey of wealth creation their grandparents took, learn from their parents who challenged the status quo, and together design a sustainable future for the family.
Every curse has a corresponding blessing.
While it can take three generations to lose it, three generations working together can build a foundation that is enduring.
Conversation Starters:
How do you deal with children who want to “do things their way”?
Further reading:
The ‘Shirtsleeves-To-Shirtsleeves’ Curse: How Family Wealth Can Survive It
Intergenerational wealth – the importance of key conversations
100 Families’ Secrets to Staying Wealthy for 100 Years
Next-gen billionaires are breaking away from their family businesses as they inherit wealth
Breaking The Third-Gen Curse: How Family Offices Are Evolving Today
