Rich Kid, Poor Kid

Being neither young nor a mother, I do not often look at, a website aimed at young mothers. But I recently came across an item there that struck a familiar chord.

An Anonymous Mom (a column at mommyish that features readers’ submissions) wrote about how “I procreated with a rich man. And then a not so rich one.

Her daughter with her ex-husband is almost 11, she wrote; her son with her current spouse is not yet a year old. “My daughter has been to Disneyland twice, Italy, California, Hawaii, Aspen to ski in winters, Arizona for spring break, and stays only at the best hotels. She has known how to call room service since she was two years old. When her father takes her on vacations, they always fly business class and she always comes back with a second suitcase full of new clothes (Dolce and Gabbana outfits, buttery-leather jackets, designer jeans.) Recently, her father took her to Los Angeles and she came back with five – yes five – pairs of new shoes, three new dresses, and a fur vest that I wished was a few sizes bigger so I could enjoy it too.

“My daughter, thanks to her father, has more purses than I do.”

At this point you might be waiting for the author to recite a litany of complaints: Her ex is spoiling their daughter or using his money to buy her affection; her current husband feels threatened and insecure; Mommy is being made to look like the cheap or thoughtless parent; little brother will inevitably be jealous and resentful.

Actually, however, the writer and her blended family come across as a nicely balanced group. She describes her ex-husband as a loving father who is very close with his daughter. She notes that when the daughter receives an iPad or other fancy birthday present, her ex puts Mom’s name as well as his own on the card. And he is good about big things as well as small ones. “I asked him once if I should start saving for her college education, and he said, ‘Don’t worry about it.’ And so I don’t.”

But what does it mean when a second child comes along who does not have all those advantages?

“When I got remarried two years ago and had a second child, I hadn’t really thought of the differences in how they would be raised,” the writer continues. “My husband and I already joke that our son better be good at some sort of sport to get a scholarship to college. I think about where we live and how there’s a great public school around the corner. My son will be going there.

“I also think how lucky I am to have a son as opposed to another girl. He won’t be jealous of her walk in closet full of the best of clothes.

“And, yes, we do go away on vacations as a family, but we sit in economy class, and stay at family-friendly cheap hotels. My daughter doesn’t realize just yet that she too will be very rich someday (she is her father’s only child and her father and I have discussed her trust fund, which she will inherit when she is 30.) My son, however, has no trust fund, and probably will never know what those words mean.”

Does this situation present a problem? If so, exactly what is wrong?

The mother herself does not say there is a problem. She merely writes that she finds her position “very perplexing.” She wants the best for her daughter, who has it; she also wants the best for her son, who certainly is not deprived of any necessities and who, moreover, lives in a loving home with both his parents, something not true for her daughter. Maybe, the author concludes, love can eventually conquer all.

In her case, moreover, I think there is a very good chance that it will. I mentioned that this letter struck a familiar chord. After nearly 30 years of working with affluent families, I have seen all sorts of ways in which money can cause discord among siblings, and between parents and offspring. But problems are not unavoidable. Fights over money seem, more often than not, to really be fights over other things – such as parental affection and approval – for which money is merely a proxy.

If a parent in this situation came to me for advice, I would offer two thoughts. The first is that “fair” and “equal” are not always the same thing. Her two children are not in an equal position, but it is not because anyone is being unfair. It is just the way things worked out. Conversely, the writer and her current husband should teach their daughter that with limited resources in their household, and with her needs already satisfied, it is not unfair if they concentrate their resources on her brother, and that it does not mean they love her any less.

This leads to my second point, which is that the most important goal for the parents might be to foster a strong relationship between the siblings. Being opposite genders and 10 years apart in age, they are not going to be best friends and playmates any time soon. But big sister can be taught to be an advocate and protector for her little brother. Little brother will, naturally, look to his sister for companionship and moral support.

After all, the three grownups in this scenario will someday be out of the picture. Brother and sister will be left with one another. The gap in their ages and genders can be spanned, but building bridges between them is best accomplished while they are young.

The daughter’s father sounds like a decent man who has good parental instincts. (You don’t get to be very close to a child by buying her anything she wants. You become close by offering time, emotional support and attention, which are the prime attributes of a good parent.) Mom can ask her ex to help encourage their daughter to remember her little brother when she is traveling, by coming home with a gift or memento as he gets old enough to enjoy these things.

Daughter can even be paid an allowance or be prompted to earn a little money from babysitting her brother or by doing other chores, so she can buy things for him and for herself with her own money. This will have the added benefit of teaching a work ethic to a girl who is destined to inherit a trust fund at 30.

A dramatic wealth disparity between siblings can cause problems, but it doesn’t have to. As with many things, the keys are in the examples and expectations that parents set. My experience is that a house full of caring and love tends to produce happy, well-adjusted kids, no matter how rich or poor.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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