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How Much is Enough?

November 2011

Most people pass their assets on to their children from a desire to keep them from going through the same hardships they did. That being said, they may choose to consciously limit what they pass on for fear that their children won't learn the value of a dollar, or of work. A few even disinherit their children because they feel it's important to make them earn it on their own.

Which is the "right" way? Warren Buffet is often quoted as saying that he wants to leave enough money to his children so "that they feel they could do anything, but not so much that they could do nothing." (1) But how much is enough to do anything, and when does it become too much? After all, most of us would like to see the remaining fruits of our labors benefit our children most (blood is thicker than water), but neither do we want to "ruin" them.

Is there a "right" amount to pass on? That's a big question, so let's take a step back to consider it in its entirety, and perhaps even to reframe the question. Rather than focusing on how much money to leave our children, let's instead focus for a moment on how best to prepare our children to become responsible stewards of wealth. This, in the end, may benefit them far more.

When you think about it, many who want to limit or eliminate an inheritance often are attempting to teach their children the same way they learned. But the school of hard knocks may not be the best place to send them. In most cases, our children have led very different lives from ours. We've given them opportunities and experiences we may never have had growing up — travel to Europe, private schools, upscale summer camps...not to mention smart phones, iPods and all the rest. (Come to think of it, if only we'd had the opportunities our kids have had, who knows what else we might have accomplished!)

When we raise our kids with such privileges, will the withholding of an inheritance teach them what took us a lifetime to learn? And what is it that they really need to learn?

One critical life skill is the making of principled decisions. Principles form the basis for our own personal codes of conduct, and arise from our having decided where we stand on certain matters; in short, what we will or will not do in a given situation. Principled decisions, then, arise primarily from a rational belief system as opposed to emotion-based feelings. Important decisions, if made thoughtfully and in alignment with our core principles, usually stand the test of time far better than those made impulsively, based largely on what
"feels right." (2)

It's normal, of course, to assume that our children already know what we believe, or where we stand on things. After all, they've grown up around us. But they may not fully grasp as much as we think. We might consider sharing with them the principles we've fashioned out of experience and reflection — not simply to have them adopt those principles, but to help them understand how we arrived at them, and why they're important to us.

As our children became more articulate, we would do well at times to assume an "interested listener" role, respecting their right to think differently and listening to them without judgment (insofar as possible) as they learn to speak and think about their own lives and principles. It's a matter, then, of teaching them not what to think but how to think for themselves, how to arrive at a decision based on logic and personal principles and being able to recognize the difference between feelings and beliefs. (3)

So, instead of worrying about how much is enough to leave our children, perhaps the question should be that of how we best prepare them to make good decisions. In that way, they can become wise stewards for whatever they earn or are given, no matter the amount. That should be enough.

1. Kirkland, Richard I. Jr., Should You Leave It All to your Children, Fortune September 29, 1986

2. Gilbert, Roberta M., Extraordinary Relationships, A New Way of Thinking About Human Interactions, 144, John Wiley & Sons, Inc., 1992.

3. Gilbert, 153.

Crisis Proportions: Reacting to Market Downturns

September 2011

The market has been trending downward since July. You've see your account values drop for a while, but in the past few weeks the pace has increased. The headlines are becoming more sensational as the media fuels the fear — Markets Swoon On Recession Fears (1) is enough to unnerve most people.

Your anxiety increases as you follow the markets no longer month-to-month, but hour-to-hour. News about Greece and the Fed become your daily topic of conversation at the water cooler and dinner table. What if we go back to the lows of August 2010 (10,000 on the DOW) or worse yet—the lows of March 2009! What happens to your 401Ks that were getting close to recovering from 2009? You don't want to lose it again. So, what should you do?

Anxiety is a funny thing. As it consumes your thoughts, you lose your ability to think clearly, to put facts into perspective. Common responses to such stress can be flight, fight or freeze.


For some, the anxiety is so uncomfortable that they need to act. They call their advisor and order that their investments be sold.


Some choose to fire their advisor and replace him or her with another, or to handle their investments themselves


Others shut down and do nothing. They can't deal with the anxiety, so they cope by ignoring the problem.

All three of these are automatic responses, and you’ll find yourself consistently favoring one over the others when you face highly stressful situations. Of course, there are consequences to each.

  • The "sell everything" strategy can work if the market continues to go down AND if you have the nerve to re-enter the market at the lower levels. But most people sell at the apex of pessimism (the bottom), after which time the market turns up. Those who sold are often too fearful to buy back until the market has moved significantly higher, locking in a permanent loss.
  • An anxiety-driven decision to switch advisors seldom results in a well-thought out strategy change. The change may make you feel good for the moment, but the new strategy is likely to be overly conservative—in reaction to your discomfort—and may cause you to fall short of your objectives.
  • You may consider the freeze reaction the most desirable, since you'll ride through the market's hard times and be there when it recovers. Alas, this may not be true. While wholesale changes may not be appropriate, freezing may cost you the opportunity to make timely adjustments that could mitigate the downside and position you for a quicker recovery

While no one is immune from automatic responses, recognizing your own patterns can help you control your anxiety. One of the most effective means of reducing anxiety, whether caused by the stock market or a family crisis, is to maintain an open relationship with the people around you, such as your advisor and your family. An open relationship is one with optimal communication marked by thoughtful, nonreactive give-and-take of ideas with each party really listening (2).

Thought-based (as opposed to feeling-based) conversations center on facts, like reviewing your investment objectives, timeframe and strategy.

  • Have your objectives or timeframe changed?
  • Is your strategy consistent with the long-term outlook for the market?
  • Is there a floor or minimum threshold that your investments cannot fall below?

Together, explore the options and potential outcomes. Decide what changes, if any, are appropriate. If you establish an exit strategy to maintain a floor, be sure to put in place a re-entry strategy so that you can participate in the recovery. Similarly, if you reduce risk in your portfolio because of unfavorable market conditions, you should also set in place a plan to recognize when you should increase risk so as to take advantage of market recoveries. A thoughtful, forward-looking analysis of market conditions that takes into account your overall financial situation will result in better financial decisions.

By maintaining open relationships, you can keep your investment objectives, timeframe and strategy current, making you less likely to swoon next time the market does!


1. Wall Street Journal.September 23, 2011

2. Extraordinary Relationships: A New Way of Thinking About Human Interactions, by Roberta Gilbert, 104-110. John Wiley & Sons, Inc., 1992