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Why It Takes Just 3 Generations for Some to Lose Their Family Fortune

The three-generation curse is a real thing. Here’s how you can break the cycle.


Three generation ohana


The Chinese have a saying: “Wealth does not pass three generations.” But it’s not unique to China; the same sentiment is expressed across multiple cultures, from Japan (“rice paddies to rice paddies in three generations”), to Scotland (“the father buys, the son builds, the grandchild begs”) to even here in the U.S. (“shirtsleeves to shirtsleeves in three generations”).


Unfortunately, this family financial curse is based more on truth than superstition. And with two-thirds of baby boomers poised to inherit some $7.6 trillion in the upcoming years, it’s more important now than ever for families to keep their financial legacy for the generations to come.


According to Vernon Wong, senior vice president and manager of private wealth management at First Hawaiian Bank, issues arise when there’s a lack of financial literacy and family values are not emphasized, which lead to differences in how each generation manages money. “Those in the first generation were the creators of wealth,” says Wong. “They worked hard and made personal sacrifices so that their children wouldn’t have to.” While their children, the second generation, although they may not have experienced the same hardship, they saw what it took for their parents to build the wealth and so are more motivated to preserve it.


“The third generation grew up in the most financially secure position,” says Wong. But if they grew up without that struggle, or never learn of it, those in this generation may not fully grasp its significance. “And without that perspective, this generation may spend their wealth more freely.”


So how do families break out of the three-generation cycle? Wong says the key is having open family discussions about finances. Money is a tough topic for many families, but it’s crucial that all family members be on the same page—after all, these decisions affect everyone. Parents can start the discussion by sharing the history of the family’s wealth, and what it took, with their kids. Aging parents should make it a point to sit down with their children and factor long-term care into their financial plans. At some point, bringing in a financial adviser for guidance and education will help all family members make the best decisions.


There’s no reason why your family can’t beat the three-generation rule. Through open and honest discussions, you’ll not only secure a legacy for generations to come, but also foster deeper relationships with your family through trust, respect and understanding.



Live Wellthy


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Beautiful beaches, year-round summer weather and that iconic aloha spirit are just a few reasons why we’re lucky we live Hawai‘i. It’s no secret that Hawai‘i is one of the healthiest, happiest states in the nation—or that it’s also one of the most expensive. When you pay to stay in paradise, the high cost of living can often be a challenge. The key to living well while living Hawai‘i boils down to one thing: taking charge of your finances. And it’s easier than you think.


HONOLULU Magazine is proud to partner with First Hawaiian Bank for Live Wellthy, your new money-savvy guide to living smarter, happier, and healthier. Here, we’ll cover the most essential topics—money-saving tips, travel hacks, investing and spending wisely, planning for retirement and more—to help you navigate your finances, plan for the future and make your money work for you.

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