Parents are the ultimate role models for children. Every word, movement and action has an effect. No other person or outside force has a greater influence on a child than the parent.
– Bob Keeshan (aka, Captain Kangaroo)
Listen to the podcast to hear my personal story and how I discovered the unspoken family rules and laws that were part of my family. These (unhealthy) rules included such things as not talking about money, not talking about feelings, and “what happens in the family stays in the family”.
I have since learned to create new rules that I hope will become part of the roadmap for my family’s future success.
A good example of the 7th Key is found in the book The 7 Habits of Highly Effective Families:
Habit 1: You’re proactive. You say “I can do it.”
Habit 2: You begin with the end in mind. You identify your values and have a Family Mission Statement.
Habit 3: You put first things first. You do what best for you and your family first.
Habit 4: You think Win-Win. You think everyone can win in your relationships.
Habit 5: You seek first to understand, and then to be understood. You listen first and talk second.
Habit 6: You synergize. You celebrate differences and work together as a team.
Habit 7: You sharpen the saw. You take time to care for yourself and your family.
The 7th Key is about our personal rules and laws, morals and ethics, do’s and don’ts … and those of our family.
Why don’t most families grow from generation to generation? Because they have a pattern of not doing so.
Most families are stuck in an endless repetition that might go something like this: One generation grows wealth, the second generation holds onto it, and the next generation blows it.
There could be other patterns, such as each generation barely getting by and not having anything of consequence to pass to the next generation. Either way, it’s a pattern … which is what the 7th Key is all about.
How the Wealthy Use Family Constitutions
It’s no secret that families who maintain their wealth over many generations have a system in place for keeping the status quo.
But, contrary to popular belief, this maintenance doesn’t happen by accident or sheer luck—it requires systematic planning and preparation. It requires a constitution.
What are Family Constitutions?
The recent resurgence of the “family constitution” has its roots in the global financial collapse of 2008, a collapse that saw thousands and thousands of families fall into ruin.
Constitutions are a way of guarding against such catastrophic ruin.
They are declarations of priority and value designed to guide family’s financial decision making for generations. By establishing foundational rules for the family, constitutions increase the likelihood of a family’s ability to preserve its assets. They are also a means through which a family can explicitly define its moral and ethical values in an age where those values become increasingly difficult to define.
Family constitutions lean on rigidity agreed upon rules and priorities that dictate the distribution of accumulated wealth, particularly with regard to investment and philanthropy. These rules guard against frivolous spending, wasteful behavior, and the usage of wealth for things deemed outside the family’s interest.
Perhaps no family on the planet has demonstrated the power of the family constitution more famously than the Rothschilds.
For more than two centuries, the Rothschilds have maintained a family constitution that facilitates the development of human, financial, and intellectual capital. That facilitation is what has enabled them to enjoy the successful transfer of the family’s wealth across seven generations.
When it comes to family constitutions, the Rothschilds are the gold standard. Their 250+ years of experience can be used as a prime example for other wealthy families seeking advisement and guidance in the formation of a constitution to “protect, increase and transfer wealth over several generations.”
As Edmond de Rothschild said, “…there is no single recipe to ensure the successful transfer of a family’s wealth.”
If you are interested in forming a family constitution, there is a wealth of information out there to help you get started. I recommend starting with “Family Wealth and Legacy” as it contains a veritable library of data that can be used to begin the formulation of a long-term strategy for wealth succession.
Remember—family constitutions allow families to align their values with their value long-term. Through rigid planning and governance, wealthy families can maintain their legacy (and assets) for generations.
In summary, multi-generational wealthy families both use and model ‘rich’ habits to teach their children about money and wealth. Families who want to build generational wealth are also intentional in addressing issues in trust, education, and communication in order to prepare their children for a life of wealth.
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