By Dr. Jim Dahle, WCI FounderOne thing wealthy and/or famous people worry about, or should worry about, is shadow syndrome. Shadow syndrome refers to children growing up in the shadow of hyper-successful parents. The children of many white coat investors will never have the same income (at least when adjusted for inflation) as their parents. Doctors are already in the top 1%-2% when it comes to pay and prestige. The likelihood that their kids do about the same, much less better, is relatively low. Even if the additional financial, educational, and connectional resources accessible to the parents are applied, most kids are still going to experience a step down in their earnings, standard of living (at least without significant parental money added to the equation), and perceived prestige.
What effects can that have on their psyche, careers, and relationships? What, if anything, can the wealthy, successful parents do about it?
Getting Personal
Many white coat investors are essentially first-generation wealthy. My parents did great in life. My dad was the first person in his family to graduate from college, and my mom did the same after she turned 80 years old. He worked hard as an engineer, they saved well, and (once I intervened 20 years ago) invested well. Graduate and professional degrees and the opportunities they provide abound among the children. Even without much financial assistance, the next generation has done very well. Half their children are wealthier than they are already, and all of them probably will be eventually, at least on a nominal basis.
Is that experience likely to repeat in our family? It's doubtful. Sure, we're 6 out of 6 so far for our children/nieces/nephews enrolling in college (mostly in business, interestingly), but where will it go from there? Barring serious financial assistance from us, our kids are very unlikely to have the same lifestyle in adulthood as they have enjoyed as teenagers. What can and what should be done about that, if anything? Let's explore that idea today.
How Do Shadow Kids Feel?
Plenty of kids of the uber-famous have this problem. The BBC wrote an article that quoted singer Willow Smith (child of Will and Jada Smith) describing growing up with famous parents as “absolutely, excruciatingly terrible.” The children of Tom Hanks and the Clintons had similar things to say. A less famous example was a lady named Rose whose mother was very successful and well-known in her field. She said she just had to “go off and do my own thing for a while.” However, she eventually ended up in the same field as her mom (cooking) and even collaborated with her. She felt pressured to work particularly hard.
As the BBC wrote:
“Rose pushed herself to be the first person at work, and handled most of the logistics. ‘I went 400% because I wanted everyone on the team to know that I wasn’t just handed this thing,' she says. ‘I think I also needed to prove that to myself.'”
This happens to the children of the famous, the successful, the wealthy, and even those with “bigger than life” personalities. Only one or two of those likely apply to the children of most white coat investors. This is very different from those parents who say, “You can be anything you want to be, as long as it is a doctor or a lawyer.” That's actually REALLY common among white coat investors. But it's apparently much worse if your parent is already a successful doctor.
The BBC article talked about a fellow named Ryan:
“Ryan’s father, who was a doctor in his homeland and had to struggle through exams in a foreign language to continue his vocation in America, made it clear he wanted his son to study medicine. Ryan says this communicated to him a specific set of commands about who he needed to be in order to deserve his father’s affection and respect. Under those circumstances, Ryan found it hard to make autonomous decisions, especially if they went against his successful father’s wishes. ‘He always took it personally if I didn't meet his expectations, like I was a core reflection of him,' says Ryan.
In Ryan’s case, he broke from his father’s expectations gradually. He decided to study teaching instead of medicine after high school, and then entered a relationship his family deemed inappropriate. Bit by bit, he came to terms with his upbringing. ‘I [realized] I didn’t want to be anything like my father,' says Ryan. Still, he admits that part of him yearns for his father’s admiration. ‘I’m really trying hard not to let that influence my decisions,' he says, particularly around future career moves.
For Ryan, however, the situation is still tense. He feels as if his father continues to disapprove of his career and his relationship, if not as overtly. Limiting the time he spends with him was the best way for Ryan to avoid his father’s overbearance. ‘It’s a bit awkward,' he says. ‘But I think it’s healthier now.'”
Kids with shadow syndrome can feel a lot of pressure, anxiety, and even depression about needing to measure up. But before you think it's better to be raised by a drunk, abusive, failure of a parent, consider the upsides of these kids with shadow syndrome:
- The children of the wealthy are more successful academically, as shown by this Georgetown study.
- Wealthy heirs often inherit viable and valuable businesses.
- Valuable business, academic, and social connections are easily shared with children.
- The children of the wealthy are more likely to marry the children of other wealthy people, further bolstering their financial success.
Don't cry too much for these shadow syndrome kids, but do give them some thought, especially if your kids are in this cohort!
What Should You Do About It?
Congratulations! You're successful! And rich! And maybe even famous. Now, how can you help your kids avoid or contend with shadow syndrome? Here are a few tips.
#1 Live Well Under Your Means
Many of us started out in life not traveling anywhere. Then, we could fly coach. Finally, after some success, we can afford to fly first class. Now, imagine your kids start their lives flying first class. Imagine how disappointing that will be to discover late in their 20s that they can't afford first class and maybe can't afford to fly at all. Happiness studies show that a gradually improving standard of living brings more happiness than a particularly luxurious one. So, how can you help your kids avoid growing up feeling entitled to first-class treatment? How about never giving it to them in the first place?
This might be a good time to bring up my eldest daughter's $800 car. It only lasted 14 months, but it played its role. She learned that she isn't what she drives. However, my favorite story about that car was when she had some friends come over from school for the first time. They drove by the (newly renovated) house several times and then eventually called her rather than knocking on the door.
“We found the address, but we figured that couldn't be your house,” they said. “We know what you drive and what phone you have so we figured there was no way your family lived in that house.”
That was the day I knew I won Parenting. Mission accomplished.
But the point is that you can artificially lower your kids' lifestyle. It does not have to be the very best that you can afford. The problem is that sometimes it feels like you're punishing yourself. How about this? How about you adopt a different standard of living than your kids? There's no reason you can't drive a Tesla while they drive a Civic. You can fly coach when you take the kids and first class when you don't. My kids still think it's normal to have people sleeping on the floor of a hotel room in their sleeping bag, and if you tell them otherwise, I'll punch you in the nose.
More information here:
How I Teach My Kids About Money
#2 Communicate
How about this? Why don't you ASK your kids how they feel about growing up in your shadow and start talking about it while they're young? You can let them know how some people in their situation feel and what they have done about it. You can have them talk to therapists or advisors who specialize in dealing with this issue.
#3 Don't Force Kids into a Particular Career or Major
A kid (maybe John Lennon) was once asked, “What do you want to be when you grow up?”
“I want to be happy,” he replied.
“You don't understand the question,” said the adult.
“YOU don't understand life,” said the kid.
I can't imagine going into a career because my parents pressured me to do so. Maybe this is why 50% of doctors feel burned out. Maybe this is why 1/3 of doctors would quit tomorrow if they had the money. If you can see people who are miserable in their careers, why would you force your kids to do anything but what THEY want to do? Sure, advise them. Point out the pluses and minuses of a given career and how their attitudes toward work, income, and lifestyle might change over the next few decades. But don't force them.
#4 Lighten Their Burden
What good is money if you can't use it to help the people you care most about? Seems silly, right? However, you have to be careful not to reduce their ambition through “economic outpatient care.” The motto we have adopted is to “lighten their burden but do not remove the struggle.” That requires a very careful, individualized balancing act. To get this right, you have to really know the child. You've got to be really careful not only how you use your wealth to benefit them, but also how, when, and under what conditions you pass it on to them.
In our case, we've split their inheritance into multiple parts. We figure an inheritance when Katie or I finally keel over at 95 and they're between 55-70 won't be particularly useful. When could I have really used some of my parents' money? In my 20s—school, summer in Europe, missions, weddings, honeymoons, a car, a down payment on a house, study abroad, whatever. In my 20s, I had little earning ability and no savings, and I missed out on opportunities that are only available in that chapter of life. For our kids, we put together something to take with them when they leave home. This consists of five parts.
- A savings account where they learn how to bank.
- A 529 to pay for their college.
- A Roth IRA where all of their earnings go (via the parent match) to start their retirement savings
- A UGMA for those expenses in their 20s (i.e., the 20s fund)
- An HSA for health care expenses
That's part 1 of their inheritance. We probably won't both die before all of our kids are out of their 20s, so we'll get to see how they manage money. And that will allow us to change the rest of the plan if it seems appropriate (which we have been thinking a lot about since reading the recommendation in Die With Zero that 26-35 may be the best time to give an inheritance). What is the rest of the plan?
Nothing.
Seriously. We're giving them nothing. At least until they turn 40.
The money in their 20s fund is not enough for them to live on from 18 to 40. They will have to work. They'll have to have a career. We've lightened the burden (a financial education, a jumpstart on retirement savings, no student loans, and a 20s fund) but not removed the struggle.
Then they get 1/3 of their inheritance at 40, 1/3 at 50, and 1/3 at 60. What I expect to happen is that the big lump sum at 40 will be used to top off college funds, pay off a mortgage, and round out a nest egg, allowing them to be FI in their 40s. Then, they'll be managing the other two boluses of wealth for the next generation. But we'll see.
#5 Help Them Be Grateful
The children of the wealthy have a lot to be grateful for, but it won't happen naturally. What will happen naturally is called entitlement or “out-of-touch-ness.” Gratitude has to be taught. This can be done by emphasizing how fortunate their lives are, through travel, through giving, and particularly through service to others.
More information here:
How to Teach Gratitude to Your Kids
#6 Learn Where the Wealth Came From
A question I ask my kids is, “Where does money come from?” The older ones like to tease me:
“The money tree!”
“From dad's pocket!”
“The bank!”
But they know the answer, and they have known it for a long time. Money comes from hard work and, perhaps even more importantly, smart work. They're also aware that money comes when you work and when your money is put to work. Your kids need to understand the sacrifices you made and the work you put in to build your fortune. They should know where you got lucky and about the important decisions in your career and with your investments. This knowledge will help them to have a more realistic view of their parents, the family wealth, and their own place in the story.
#7 Build Financial Literacy
Wealthy heirs often have money dumped in their laps without any significant preparation. At a minimum, make sure they have general financial literacy. You know all that stuff you learned from this blog and some books after you got out of training? Yeah, teach that to your kids. They're probably going to need more than that, but that's a good place to start.
More information here:
Age-Appropriate Money Conversations: Teaching Kids Financial Literacy
#8 Teach Them About Both Jobs
Your children, like you, will have two jobs. The first is a career. It might be how they create their own wealth, but it should certainly give them a sense of mission with their lives. If they're getting enough wealth from you, it might not necessarily be something that pays particularly well, and that's OK. However, you must also teach them about their second job as a money manager.
Financially speaking, this is likely the more important job to learn. It's not that hard to manage a portfolio. There isn't that much to learn. But there are a few things one has to know to do it effectively. Help them develop the knowledge and discipline necessary to be successful. One or both of these jobs may be “the family business,” or they may not. This is going to vary by family and by individual child.
#9 Help Them to Be Wealth Creators, Not Wealth Consumers
If Generation 1 is the only generation that ever creates any wealth, your family is highly likely to be one of those that goes from shirt sleeves to shirt sleeves in three generations. But if the second and third generations can also learn to be wealth creators, that will go a long way toward building generational wealth.
#10 Individualize Your Approach
Each of your children is unique, and each family and each situation is unique. You will need to individualize your approach when it comes to communication, education, and training. Adjust as you go and do the best you can.
Most children of white coat investors will deal with shadow syndrome to one degree or another. Start preparing now to deal with it.
What do you think? Have you noticed this in your children? What have you done about it? What do you plan to do about it?
Thanks for great post. You nailed it!
Thanks Bev.
If I knew I was inheriting in thirds, I probably would consider the latter third my very well funded retirement. I guess a lot of us can think of inheritance that way because it should statistically line up with when we retire. Hard to bank on it but like social security it’s a consideration when you allocate savings over the years
Au contraire: as I tell my kids, of course at a much lower level of everything than Jim, you can’t count on those last two thirds until you get them.
Jim thoughtful and pertinent article as always! Unfortunately it seems my kids are already acquiring a caviar taste. They were pretty PO’d when we took Spirit and Frontier Airlines to our Disney Cruise. “But guys, we are going on a Disney Cruise!!!! Focus on that, who care how we get there, ” I said, and their response, “But there’s no TV, no Wifi, we’ll be so bored!!! Why can’t we do Jetblue again???”
I definitely didn’t pony up the money to purchase the Spirit Air Wifi to teach them, but what was interesting is that loss aversion was definitely at play. We usually fly Jetblue with the free wifi and onboard entertainment. “Losing” that now that we were flying Spirit hurt more than the freaking prospect of being on an awesome boat with Mickey and company and all you can eat food.
Have you read anything on loss aversion and prospect theory being applied to spoiled kids?
I’m sure it applies to kids at least as much as adults.
Economy tickets on Southwest or Jetblue seem reasonable to keep expectations in check. “Greyhound of the Skies” seems needlessly cruel.
nahhh- gotta teach those kids to appreciate 🙂
I’ve been on a Greyhound bus- Spirit/Frontier feels like First Class in comparison!
Interesting post. My two kids (age 10 and 13) have both expressed interest in becoming doctors over the past few years. This is interesting to me because I have NEVER once encouraged them to become a doctor. If anything I have discouraged it. But somehow both are expressing interest in it. Maybe they have some of this shadow syndrome setting in and I am unaware of it.
Either way, I still like Warren Buffett’s quote… “I want to leave my children enough so that they can do anything, but not so much that they can do nothing”
Time will tell what my kids end up doing with their lives…but I will keep this in mind as it is an interesting phenomenon.
Very thoughtful article, Jim. I’m a doctor in private practice, my husband is a retired lawyer. We have 2 girls – no lawyers, doctors, accountants, etc. One is a classical musician, the other in the liberal arts. Both grew up relatively privilieged, but very humble lifestyle. They watched me go back to school, build my practice, buy real estate, etc. They are both in college now, managing to live below their means and very thoughtful about how they spend their money. Hopefully those actions will translate into smart money management as they grow up, despite what they do for a living. Fingers crossed!!
I love the principles you imparted to your children. More shadow kids should be so lucky…
Reminds me of this, as it pertains to privilege and generational wealth:
” The science of government it is my duty to study, more than all other sciences; the arts of legislation and administration and negotiation ought to take the place of, indeed exclude, in a manner, all other arts. I must study politics and war, that our sons may have liberty to study mathematics and philosophy. Our sons ought to study mathematics and philosophy, geography, natural history and naval architecture, navigation, commerce and agriculture in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry and porcelain. ~John Adams”
Work hard so your children can be artists.
I’m going to disagree with this statement “ Money comes from hard work and, perhaps even more importantly, smart work.”
It can, but a lot of wealth isn’t from these characteristics. Bitcoin, inheritance, lucky viral YouTube videos, etc. Also once you have millions more money comes effortlessly from investing, other than the psychological distress of crashes.
Downside of believing money comes only from hard work is that leads to tolerating extreme inequality since of course the rich earned that money and have it since they are “better” than others.
Of course better to cultivate hard work for your kids as that does lead to financial success but also good to have another perspective.
Greg, that’s nonsense. Of course money comes from hard work.
Now, nobody said money ONLY comes from hard work… but it definitely correlates.
It’s just like brushing your teeth. Brushing your teeth prevents cavities. And while some people get cavities despite how committed they are to their toothbrush— and likewise other folks are cavity free even when they never see their dentist— It’s still true… a healthy smile and a healthy income come from brushing well and working hard
While it’s possible to get money without working hard, that isn’t the way to bet. Nor to provide motivation.
I would say the vast majority of wealthy people, especially first generation wealthy, worked pretty hard at some point.
Thanks for addressing this topic. These are important issues for doctors and other successful professionals with kids. I have two college “kids” and it’s difficult to get the balance right between helping your kids succeed without making it too easy or spoiling them and also the balance between motivating them to work hard without making them feel they’ll be a disappointment if they aren’t successful. One advantage of sending them to college has been a recalibration of housing expectations. After living with a roommate in a small dorm with shared bathrooms, getting an a modest apartment with roommates was an upgrade. Hopefully this will help them be appreciative when they are able to afford a condominium or small starter home that will certainly be much smaller than when they were living with us.
Loved this post. We have been working through these issues with our kids too (now late teens). You’ve mentioned some of these strategies in passing here and there. Nice to see the evolution. We’ve arrived at a similar plan. One of the other strategies that we’ve been using is to teach our kids the skills to solve their problems rather than just throwing money at them. That is a balance because we also want to value time, and there are things wealthy people will spend money on to save time, which is also good.
A couple of examples. When something breaks, we usually attempt to fix it. Some basic electrical, shop, or engineering skills are involved. They’ve gained skills, helped reduce waste, and this will save them money when they are on their own. They also know how to operate a lawnmower, snowblower, and basic tools. Our kids also share one of our older vehicles (about 15 years old now, but it’s a Toyota). Together, we’ve changed out lights, put on new seat covers, and done other things to make it look “cooler”. My son just spent a day detailing it. They can change their own tires and know how to jump a vehicle when their battery dies from firsthand experience. They are also proud of their vehicle when the “Audi-kid” at school comments on how their old 4Runner looks, and they get to say that they did the mods. Or when they can play hero with the jumper cables.
-LD
The eye-opener will be when they are in college and realize how lucky they are to not have student loans.
Love this post.
I think about this for my kids, though I lived through a different version of it myself with my parents. And your post helped me realize this more clearly. Thank you.
My dad was a minister, and my parents ran a non-profit counseling center for 30 years. My dad would provide counseling for as little as $15 an hour. As an attorney, I charge a lot more. There is a voice in my head that often tells me I could and should be doing more to help others. I feel like the service I provide to others exists in the shadows of the work my parents did. I admire their devotion to the service of others.
The other piece I enjoyed was your observation that “Happiness studies show that a gradually improving standard of living brings more happiness than a particularly luxurious one.” As I think about new luxuries we enjoy as a family, I think we benefit from slowly increasing the speed on our hedonic treadmill. We probably could increase the speed quicker, but this reinforces that we’re likely to get more enjoyment from the more gradual increase.
1. Keep teaching your kids through example.
2. My sister, a retired CPA, was asked by a neighbor if she would be interested in helping do tax returns for low-income families. This was ten years ago. She has found her niche in helping others with her skill. It is all because another person reached out and asked her if she could help.
“Money comes from hard work and, perhaps even more importantly, smart work.”
The whole idea of physicians and hard work has always amused me a bit. Who works harder, a coal miner or a doctor? We physicians perform our work in air-conditioned clean spaces. The work is not mind-numbing or dangerous. It doesn’t break our backs. “Hard work” needs a lot of unpacking in order for it to be meaningful and actionable, at least when talking of deserving high incomes. Who works harder, the coal miner or the physician? Or the kindergarten teacher or the NFL quarterback?
I read somewhere that what we are paid is based on three things: what we do, how well we do it and how easy we are to replace. Our choice of “what we do”, what job/career, will make a huge impact as society rewards different types of work differently. “How well we do that job” leads to an understanding of sacrifice and tradeoffs, long hours, performance, working well with other people. Finally, if we are hard to replace, this tilts the economics of demand-supply in our favor.
This is not to detract from your excellent article and I’m addressing a small side bar here. That said, if we are using the words hard work or smart work as advice, it needs more explanation as to what that actually looks like.
Don’t dive too far into this. There are exceptions to everything.