Lifestyle + Wellness

Wealth and Family Dynamics: Challenges Wealthy Kids Face

BY Spectrum Wealth Management | Sep 10, 2021

Several misconceptions surround those from a wealthy upbringing.  Did you know that children raised in affluent households actually have a higher chance of having financial issues or suffering mentally and emotionally later in life than those who are less privileged?1 While it’s easy to think that large amounts of money can solve all of life’s problems, that’s not the reality of the situation for everyone. 

Mental Health and Developmental Challenges

Studies show that disorders such as substance abuse, anxiety, and depression are 20 to 30 percent more common in children from wealthy families than children from families with average to below-average incomes.2  Wealthy parents need to know that their children could be at risk for potential mental health ailments.  So, why are children from wealthy households more prone to substance abuse, chronic depression, and low self-esteem?

Frequently, it is due to pressure and expectations placed on children by the parents or household.  Successful parents have high expectations of themselves, and similarly, high expectations for their children.  Children can easily misinterpret this, and frequently children will put too much pressure on themselves, thinking it will appease their parents.

Several other risk factors present challenges to older children and teens’ emotional and social development.  Some parents focus too much on the results and not enough on the process regarding academics.  Placing the pressure of academic perfection on an older child or teen can result in burnout or losing interest in learning altogether.  Affluent children typically come from families where one or both parents are constantly working and on the go, causing them to live in higher isolation than children from families with lesser means.  This can lead to less interaction with peers, not having strong friendships through formative years, or cause a lack of self-confidence in social settings.

Financial Security Challenges

Another common misconception is that affluent children will live a prosperous life and never face any “real” problems.  The truth is that affluent children are at a significant disadvantage regarding emotional intelligence, life skills, discipline, and knowledge to attain long-term financial stability. That’s why wealthy parents must focus on preparing children for financial success later in life.  If you don’t recognize the risks of affluence and address them early on, your children may have a higher chance of failing as adults.

The illusion of security or perception of financial success and abundance at home can be deceptive for a child and lead them to think that they are set for life.  Children in wealthy families often live in a lifestyle bubble.  They frequently have no idea how money is earned, budgeted, and spent and often, if not always, get what they want when it comes to material possessions.

The problem with the lifestyle bubble is that inevitably the child will one day become independent and have their own bills, loans, and mortgages to pay—and there is always a risk that they could lose their wealth if they are not adequately educated on how to grow and sustain it throughout their lifetime. 

What good is a substantial inheritance if the child isn’t equipped with the knowledge and emotional intelligence to manage the transfer of wealth?

Helping Kids Apply Emotional Intelligence to Money

The good news is, many of the positive traits carried by the parents who created wealth, such as being goal-oriented, achievement-driven, and analytical, pass down to kids.  The obstacle for wealthy parents is recognizing the risks and challenges mentioned above and finding ways to incorporate a healthy and productive relationship with money into their child’s life as an ongoing process.

Just like adults, children have Emotional Profiles, more commonly known as personality types.  A person’s emotional profile is one of the most significant determinants of an individual’s relationship with money and financial success.  Emotions and belief systems influence how we manage our money throughout our lives. It’s important to know that our Emotional Profile type is set early in life and does not change.

For example, if a child likes to solve puzzles, he or she will likely tend to take a problem-solving approach to finances later in life.  Their Emotional Profile may be the Problem Solver.  If a child is very social and likes to complete tasks and share with others, they will likely grow up to be a Giver that connects with others in emotional ways.  This behavior will flow over into their relationship with money. Parents should find the best approach based on their child’s individual personality type regarding financial literacy resources.

There are several different types of simple strategies that wealthy parents can use with their children to help them develop the necessary skills to face financial adversity and manage money.  It may be as simple as establishing weekly chores to “earn” spending money, or, delaying gratification for younger children, even if money is no object.

Instead of buying them every toy or material item they ask for when they ask for it, delay the purchase.  Or, when a child becomes old enough to go shopping with you, give them a small amount of money, such as $10, and tell them to buy as much as they can with that amount.  Will they choose one $10 item or ten $1 items?  It will teach them a good lesson in resource management.  For older teens who have a sense of financial responsibility, try giving them a moderate weekly allowance to use for entertainment and shopping, or, if you are comfortable, add them as an authorized user to your credit card and teach them how to use credit responsibly.

As the old saying goes, “money can’t buy happiness,” and it certainly doesn’t grow on trees. More often than not, wealth is taken for granted.  This can be disadvantageous for children who are educationally and emotionally vulnerable and underprepared to manage their financial future.  Parents can take an active role in ensuring the wealth they’ve created stays in the family by recognizing the risks related to affluence and helping children develop financial literacy and emotional intelligence.


This content is developed from sources believed to be providing accurate information, and provided by Spectrum Management Group. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.