Most parents believe giving their children money is an act of love. It’s not. It’s training them to be weak.
Wealthy families understand something most people never learn: the way you transfer money to the next generation determines whether that money builds them or ruins them. And the difference isn’t in the amount. It’s in the structure.
When you give your child money as a gift, you teach them entitlement. When you loan them money with terms, you teach them stewardship. One creates dependency. The other creates discipline.
This isn’t about being harsh. It’s about understanding that money without structure doesn’t just fail to build wealth. It actively destroys the people who receive it.
The Problem Hiding in Plain Sight
Every parent says they want to help their children. They work for decades building businesses, accumulating assets, saving money. All with the hope that when they’re gone, their kids will be taken care of. But here’s what actually happens:
The parents build wealth their entire lives without ever teaching their children how it was built, how it works, or how to manage it. Then, at the moment of death, they dump millions of dollars onto people who have no framework for handling it. The result?
Seventy percent of wealthy families lose their wealth by the second generation. Ninety percent lose it by the third. Not because the money wasn’t there. Because the training wasn’t.
Why Gifts Are Poison
When you give your child money, whether it’s $500 for new shoes or $50,000 for a down payment, you’re teaching them a lesson about how money works in your family.
You’re teaching them that money flows one direction. From you to them. That their role is to receive, and your role is to provide. That wealth is something that happens to them, not something they create or steward. And when they inevitably spend that money and need more? They come back. Because you’ve trained them that this is how the system works.
Gifts don’t teach responsibility. They teach dependence. The wealthy know this. So they don’t give. They loan.
The Training Policy Framework
Wealthy families don’t wait until their children are adults to teach them about money. They start when the kids are young, using what’s called a training policy. Here’s how it works:
When a child is born, the parents establish a life insurance policy on that child with high cash value. They fund it annually, often $5,000 to $10,000 per year. The death benefit might be $1 million. But that’s not the point. The point is the cash value.
By the time the child is 16, that policy might have $125,000 in cash value sitting inside it. The parents control the policy. The child is the insured. And the parents now have a tool to teach lessons that matter.
When the child asks for a car, the parent doesn’t say yes or no. They say: “You have a bank. It’s called the Bank of Your Name. And in that bank, you have money you can borrow for certain things… if you follow the rules.”
The child wants a $30,000 car. The parent loans them $30,000 from the policy. The child makes monthly payments. Not to Ford Motor Company, but back to their own account.
Every payment they make goes back to them. And when the car is paid off? They can borrow that money again. This is the opposite of what most people teach. Most people teach their kids to borrow from banks, pay interest to strangers, and never see that money again.
Wealthy families teach their kids to borrow from themselves, pay themselves back, and reuse the same capital over and over.
The Difference Between Inheritance and Preparation
Most people think estate planning is about transferring assets efficiently at death. Wealthy families think estate planning is about preparing the next generation to receive those assets decades before they inherit them.
The family constitution. The governance documents. The dynasty trust. These aren’t just legal structures. They’re training frameworks. They exist to teach the next generation how money flows, how decisions get made, how wealth gets preserved.
But if you wait until you die to activate those systems, you’re counting on a piece of paper to do what you should’ve been doing for 20 years.
A family constitution is an emergency ripcord. It’s there in case you die unexpectedly and your kids need structure to prevent them from destroying everything you built. But it’s not a substitute for actually teaching them.
Why Control Beats Generosity
Here’s the uncomfortable truth: if your plan is to “set your kids up” by leaving them money when you die, you’re almost guaranteeing they’ll waste it.
Because they won’t have spent 20 years learning how to use it. They’ll have spent 20 years watching you build something they don’t understand, waiting for the day it becomes theirs.
And when it does? They’ll have no framework. No training. No muscle memory for how wealth actually works. The training policy solves this by keeping control in the parent’s hands, even after the child turns 18.
If the child is 25 and wants to start a business, the parent can say yes or no. If the child is 30 and wants to buy a house, the parent can structure the loan, set the terms, and ensure the money gets paid back.
The child never gets a lump sum. They get access. But only when it’s structured correctly. This isn’t about being controlling. It’s about recognizing that money without discipline doesn’t just fail to help—it actively harms.
What This Looks Like in Practice
Imagine a 10-year-old who wants to start a lemonade stand. Most parents say, “That’s great, honey,” and buy the supplies. A wealthy parent says, “That’s great. Do you have money to buy supplies?”
The child realizes they don’t. The parent explains: “You have a bank. You can borrow money from it. But you’ll need to pay it back.” The child borrows $200. Buys supplies. Runs the stand. Makes $350. Pays back the $200 plus a small amount of interest.
Now the child has $150 in profit and has learned that capital can be borrowed, deployed, and returned. That businesses require funding. Those loans have terms. That paying yourself back means you can borrow again. This is a lesson no amount of allowance can teach.
Why Most Parents Get This Wrong
Most parents don’t structure money this way because it feels harsh. It feels like you’re making your kid’s life harder than it needs to be. But the opposite is true.
You’re not making their life harder. You’re making them stronger.
Because the world doesn’t give anyone money for free. The world loans it with terms. And if your child learns that lesson inside your family system, where the consequences are small and the feedback is immediate, they won’t have to learn it the hard way later.
The parents who give freely think they’re being generous. What they’re actually doing is postponing the lesson until the stakes are catastrophic.
The Shift Required
If you want your children to handle wealth responsibly, you have to stop thinking about money as something you give them and start thinking about it as something you train them to use.
That means structuring every financial interaction as a lesson. That means replacing gifts with loans. That means using tools like training policies to create real consequences in a safe environment.
And it means recognizing that the hardest part of building generational wealth isn’t making the money. It’s raising children who can handle it.
The Question in Front of You
Right now, your children are learning about money whether you’re teaching them or not.
If you give them everything they ask for, you’re teaching them that money appears when they need it. If you loan it to them with terms, you’re teaching them that money is a tool they can control. One lesson creates dependency. The other creates discipline.
The wealthy chose discipline a long time ago. Not because they’re cruel. Because they understand that the greatest gift you can give your children isn’t money.
It’s the ability to handle it.