What interest should go first?
Family Capital is defined as durable family harmony and governance.
Financial Capital is any investable asset – time, treasure, tithe or truths.
I’m not sure which form of capital goes first.
But I am sure that values drive behaviors. We love our children, and we would take a leave from work to care for our children. Right?
Recently one of my clients shared a story of a family that did just that. They rallied around a 2-year old fighting cancer. They re-designed work loads and scheduled care givers. They pooled money to support the healthcare costs. And last week they rang the bell- to celebrate! The nurses lined the hallway. The neighbors lined the street. The grandparents drove the car. The parents waved to neighbors and protected their immune-compromised child from any risks. Values drive our behaviors.
I am also sure that most families share the same values: integrity, asset preservation, legacy stewardship, philanthropy, responsible service to others.
When I directed a non-profit summer camp program at a Quaker School near Washington, DC, I saw those values every day. Parents invested as much as possible to provide more opportunities for their children. That program grew over 800% because of their shared values.
Many of those parents struggled to support their children. They wanted to support their family capital. And they had limited financial capital. Just like you and I.
My experience is that most families struggle with financial literacy because they don’t discuss financial capital enough. There is an endless need for family meetings to discuss cash flow and investing.
When our children were in Middle School and High School we had Sunday evening meetings after dinner to discuss the week, and financial matters. They were short meetings. The children led parts of them. They learned to live below their means. They learned that what their friends posted on social media was not always true. They learned to invest in compounding assets.
Now I facilitate family meetings for clients. On Tuesday night I facilitated another virtual 90-minute family meeting. The patriarch, matriarch and a sister represented the Elders. The Next Gens included 3 children aged 28-40 and one spouse. Three wealth advisors provided content on retirement and investing options. My role was to encourage the Next Gens to ask questions about Roths, IRAs, compounding, employee matching… everything needed for them to make more informed decisions.
That was their second educational session and we will have at least two more in the next 4 months. One breakthrough was when the daughter, newly divorced and single, realized more options from her employee match. Another breakthrough was when one of the sons realized that as an independent contractor doing work for the family business, he needed to contribute more to his pretax options.
As the children shared their takeaways the father was glowing with delight.
Every Elder wants their children to make smarter financial decisions.
Maybe Family Capital and Financial Capital go hand in hand.
Any thoughts?