I feel like there are unquantifiable changes happening now that will impact our kids, mainly automation. The best I got is to keep working, investing as much as possible (including into much reviled around here Bitcoin), try to educate my children as best as possible and give them as trauma-free a childhood as I can. The future they will inherit will likely be more cutthroat, hotter and filled with challenges we can’t picture right now. However, we have automated surgery and LLM’s that can replace 1L law students, so I’m basically trying to get my kids to learn about careers that can’t be automated well (therapists?), real estate rentals and investing because those things are important in times of uncertainty.

Anonymous wrote:OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

It is normal to have a lower standard of living than your parents when you are a young adult. If you’ve explained financial basics to your child and explained that they will need to finance the bulk of their expenses after college they should intellectually understand what that will mean. And if you raised them with the belief they will need to work hard for things and not get things handed to them they should be fine.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Generational wealth here. I think key is not to touch the principal and have good investing strategy. We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”

Let me get this straight, you don’t understand why you don’t touch the principal? When you burn through the principal and you are broke you will quickly learn why. You are the example of why generational wealth only lasts a generation or two.

Not touching principal is wrong-headed. What matters is total return. It's entirely possible to consume both income and a percentage of principal and still have overall portfolio growth - it all depends on overall portfolio growth rate and the percentage of principal being consumed annually. Obviously, the less income and principal one consumes the larger the rate of portfolio growth will usually be, depending on market conditions, but it's a fallacy to assert that one can never consume principal and still have portfolio growth.

Middle manager eeking out a HHI of 280 having come from LMC start. In the context of this discussion this is clearly shorthand for don't take out more than is needed to keep the growth that is necessary to preserve the money. My farmer forebeares would say "don't eat the corn seed." The principle is the same (but not the principal!)

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Generational wealth here. I think key is not to touch the principal and have good investing strategy. We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”

Let me get this straight, you don’t understand why you don’t touch the principal? When you burn through the principal and you are broke you will quickly learn why. You are the example of why generational wealth only lasts a generation or two.

Not touching principal is wrong-headed. What matters is total return. It's entirely possible to consume both income and a percentage of principal and still have overall portfolio growth - it all depends on overall portfolio growth rate and the percentage of principal being consumed annually. Obviously, the less income and principal one consumes the larger the rate of portfolio growth will usually be, depending on market conditions, but it's a fallacy to assert that one can never consume principal and still have portfolio growth.

Anonymous wrote:OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

They would likely react the way *you* would react, because you and your husband have likely been the biggest role models for this kid so far. So how would you react?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Generational wealth here. I think key is not to touch the principal and have good investing strategy. We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”

Let me get this straight, you don’t understand why you don’t touch the principal? When you burn through the principal and you are broke you will quickly learn why. You are the example of why generational wealth only lasts a generation or two.

I’m a pretty good steward, actually. But “don’t touch the principal” makes no sense. For one thing, how do you decide what is principal? I don’t understand why you would treat income differently from other gains. Or draw a line when what, when someone dies? When a business is sold? If we’re talking about deciding what to spend, well, that’s a different question and it’s based more on values and circumstance imo. For example one family branch/generation might draw nothing and add to the investment pot. Another might have a kid with special needs and take a lot. I’m all for responsible stewardship I just think “don’t touch the principal” is really not good enough as a plan.

^wailing

Anonymous wrote:I come from an aristocratic family with a recorded history going back to the 900s. My great-grandfather was a genealogist who sifted through records to put together the family tree and any attached history, and turned the whole thing into a book.

It's been interesting to read how only some of my ancestors built fortunes, at first fortunes of feudal conquest, and then political and business wealth, upon which the rest were able to live. Some relatives conserved money, others squandered it, but what's noticeable is what PP said: that it's rare for one individual to make a lot of money.

So don't worry overmuch about your kids do and don't be so prepared to lay guilt and shame at their feet for not living up to the efforts of their immigrant forefathers. They're not living in the same socio-economic conditions.

Interesting to be able to go back so far. My family has "fallen" from upper, upper middle class (maybe poorest rich) to lower, upper middle class in 125 years. So a status drop. However, in terms of life basics, I like to think about how we are much better off than medieval kings in terms of healthcare and longevity.

It's clear to me that choosing educated but lower-paying professions and marrying down for brains and love has diminished the family wealth. Also our family is very small. We moved through the demographic transition where educated women had only a few children long ago. And there were also a lot of female descendants and due to discrimination against women, that has meant a reduction in income potential.

I'm glad the world has modernized. I'm also fine with people prioritizing their intellectual interests over making piles of money. I'd say that although we are great savers, we are not good long-haul investors. Low risk-tolerance and low trust in others have prevented wealth from multiplying. I'm conscious of that and looking for ways to improve. But I'm not going to spend time weeping and waiting about a declining generational standard of living that has still given women more autonomy and safer lives. And I do expect the future to be an improvement regardless of an inflation-adjusted wealth stockpile.

Anonymous wrote:

Anonymous wrote:Generational wealth here. I think key is not to touch the principal and have good investing strategy. We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”

Let me get this straight, you don’t understand why you don’t touch the principal? When you burn through the principal and you are broke you will quickly learn why. You are the example of why generational wealth only lasts a generation or two.

Anonymous wrote:OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

Life hands everyone meaningful setbacks. Not everything is about money.

Anonymous wrote:OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

You address this with discussions about family and personal values, which should be immutable without regard to how much is in the bank at any given time. And, as suggested earlier, a solid understanding of personal finance and investing is the key to building, retaining, and growing wealth, even in the face of financial headwinds. Investing instead of speculating, and spending less than your income are basic principles which will serve your child well in good times and in bad. Flexibility and adaptability are essential traits to inculcate, along with knowledge about investing, saving, and spending wisely.

Anonymous wrote:OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

That's a little different. You needed to teach them to not be too attached to material things. It comes more easily to some people than others. I deliberately kept our house small, our cars modest, etc. They have not lived in the lap of luxury. Also, they have both been challenged, intellectually and physically, by various activities that I deliberately chose because they were hard for them. One of them has ADHD and the other has an auto-immune disease, and their lives haven't always been easy.

Anonymous wrote:

Anonymous wrote:Generational wealth here. I think key is not to touch the principal and have good investing strategy. We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”

Different poster here. What part don't you understand? I have 20M in the stock market. I use the dividends to pay for living expenses. If I start selling stocks, then I won't have as many dividends, right? That would be stupid, correct? It would be wiser for me to get a higher-paying job, or cut my budget, so that my source of wealth isn't eroded. You never kill the goose with the golden eggs.

Sometimes you do need to invest differently, switch industries, liquidate in troublesome times, etc. But the idea is to always plow it back in, so you money can continue to work for you.

OP here. I appreciate all the thoughtful replies, and am realizing my concerns about generational decline are likely overblown and premature!

We’re far from family office-level wealth, so yes, I imagine our kid will need to work in order to maintain the lifestyle we’ve provided for them to date. To their credit, they don’t seem to be afraid of hard work - for example, they successfully balanced a part-time job throughout senior year of high school with academics and other extracurriculars (and of course college applications).

I guess my real fear is about resilience. This kid has never experienced a meaningful setback in life. That may be a topic for another forum, but specifically in terms of money and finances, I wonder how they would even react if faced with a lower standard of living!

Anonymous wrote:The best thing you can do in a post-AI world is probably to encourage entrepreneurship. I predict there will be less room for corporate cogs in the future, but I'm just a random internet commentator.

My family is weird because my parents are wealthy but barely graduated from high school.

The next generation, which is me and my siblings, all got white-collar jobs thanks to fully funded educations, but because none of us is entrepreneurial, we're already financially behind where our parents were at our age.

My least academic kid is also the most entrepreneurial - he has been starting little businesses like window washing and snow removal since he was pretty young, and trading in his green light account. I think he will outperform his more academic siblings, but who knows? I hope they all do great and rise to the level of their grandparents.

It’s not weird at all entrepreneurs have innate skills that have nothing to do with academics. Going to a good college, learn a specific trade like law or finance and you should do very well.

Be a hustler with drive and ambition who’s willing to start small and build assets and you do better. There are a lot of Eastern European immigrants around where we live. They own apartment buildings, gas stations, restaurants, rental houses and they live in $3 million dollar homes. They did the sweat equity when they were young, most have kids in the business.

Most of the older ones came here when the Soviet Union collapsed with nothing. They were used to having nothing so they easily tolerated the lean years.