Dave Ciambella

Developing Monetary Literacy
April 18, 2008

Why is this important issue given such little attention? This question has boggled my mind for quite some time. Somehow our children make their way through high school and even college, yet the vast majority graduate with very little exposure to some of the basic financial necessities such as balancing a check book and understanding credit cards. In fairness to our educational system, this is not completely their responsibility. Parents are also responsible.

You may be wondering “what does this have to do with succession planning"?

The bottom line is if you are not teaching family members the importance of monetary literacy, there is a good chance this could impact the ongoing success of your business. Without financial understanding and accountability, your children will not be good stewards of what you have worked a lifetime to build such as the business, real estate, investment portfolio etc.

I realize this may not be a revelation to you, however; all too often my partners and I encounter situations where family members are in desperate need of basic financial education. As a successful business owner, there is a natural desire to provide for your children. What is not natural, however; is providing exorbitant salaries to employed family members for doing little work and compensating for most other things such as an automobile, insurance, rent or a mortgage.

Unfortunately good intentions sometimes lead to an entitlement attitude, laziness and monetary illiteracy. Enabling parents are truly doing their children a disservice which could lead to financial ruin as well as a lack of self worth. And what will happen to the business and your children’s finances after you are no longer around to control and bail them out of financial challenges?

Be a catalyst for financial literacy by considering some of the following suggestions:

1. Require your children seek gainful employment outside of the family business for a minimum of two years. Let them learn what it means to be an employee outside of the family business (show up on time, be held accountable etc.).
2. Assist children with educational expenses and living expenses while in school. In the event the child is no longer in school (for example, graduates or drops out) turn off the money faucet.
3. Require children enroll in a financial management course and successfully complete it.
4. Mentor your children and be a good example through role model behavior.
5. Involve your children in business situations where they can learn important lessons such as budgeting, forecasting, and reviewing the financial statement.
6. Celebrate their successes along the way!
7. Require children become a co-trustee prior to inheriting assets from your estate. They will have an opportunity to become familiar with assets they will eventually be responsible for and also learn about investment management.

Posted by Dave Ciambella on April 18, 2008 | Comments (0)