Posted by Mandy Collins | 29 June 2017 | 1,801 times
Family fortunes take a long time to build but are easily lost if subsequent generations don’t have the financial savvy required to maintain them.
Imagine taking $100 and turning it into more than $100-million. And then imagine growing it to $200-million – that’s $300-billion in today’s money. You could never spend that much, right?
Wrong. That’s exactly what happened to the Vanderbilt family fortune. The descendants of patriarch Cornelius “Commodore” Vanderbilt managed to spend the whole lot. Lavish homes and opulent parties soon lapped up their wealth, and some members of the family died penniless.
The Commodore began his business in 1810 when he borrowed $100 from his mother and started piloting a passenger boat on Staten Island. He expanded into steamboats and went on to build the New York Central railroad empire, which stretched across the US and created a rail service monopoly in and out of New York City.
But subsequent generations squandered the family fortune by building grand mansions and throwing extravagant parties. Theirs was a life of excess as they used their money to rise to prominence in New York’s social scene in the late 20th century.
Members of the Vanderbilt family built many of America’s most extravagant private homes, such as “The Biltmore” in Asheville, North Carolina, and “The Breakers” in Newport, Rhode Island. They also owned 10 mansions on Fifth Avenue in Manhattan, dominating prime real estate in the world’s wealthiest city.
But while the first of the Vanderbilts’ Fifth Avenue mansions in Manhattan was completed in 1883, by 1947 all 10 had been demolished, once their contents had been auctioned off. Within just 30 years of the death of the Commodore, not one member of the Vanderbilt family was among the richest in the US – simply because they went from being producers of great wealth to being great consumers of it.
Jamey Lipschitz, head of wealth management at Sanlam Private Wealth, says making sure heirs do not spend the hard-earned family fortune should be a priority.
“It starts with the parents,” he says. “It’s vital that parents discuss money and inheritance with their children. It shouldn’t be a taboo topic. In families where money is discussed from a young age, children grow up better appreciating its value.”
Lipschitz says most parents want to give their children a good life, but teaching solid values around money is just as important. “Children need to know that maintaining the family fortune takes a combination of hard work, discipline and wise investments. If you can instil those values, then one day they will be better equipped to preserve the family fortune.”
He adds that the greater the wealth, the greater the responsibility of the parents. “Great wealth brings great influence and power. When that wealth transitions to the next generation, it buys great freedom and choice, and the children need to be properly placed to receive it.”
Or, as Cornelius “Commodore” Vanderbilt is purported to have said to his son: “Any fool can make a fortune; it takes a man of brains to hold onto it.”
•Credit: Sanlam Private Wealth.
No comments yet. Be the first to post comment.