The Toughest Financial Challenge of All


fu bu guo san dai

 Affluent kids are, statistically, on the financial endangered species list.

And when, a few weeks ago, the business teacher at my school asked me to give some curriculum suggestions for a personal finance course at Singapore American School, I wanted to see if I could do my part to buck the trend associated with the Chinese proverb under my title: fu

fu bu guo san dai

If you don’t know what it means, you soon will.

Top insurance salespeople make great asset gatherers as investment advisors because they can punch just the right button to get clients buying insurance—or expensive investment products: the fear button.  And that’s the one I’d use when teaching any personal finance course to affluent young people.

No, I wouldn’t be telling them that if they didn’t save enough money, they could end up destitute, eating dog food and dumpster diving.  But I would say that for them, or their kids, the high socio-economic party will likely end soon.

Last year, we started a unit for 10th grade English students, focusing on what made them “outliers”.  If you haven’t read Malcolm Gladwell’s book  by the same title, Outliers (2008) the gist is this:

It takes more than just hard work to break from the pack of financial mediocrity — it takes luck.  Take my students, at our elite private school, for example.  What made them outliers?  They’re generally wealthy, or at the very least, very well off.  When I surveyed them, I found that only one of sixty kids came from old money.  By old money, the suggestion is that their grandparents—when they were kids– enjoyed the same relative level of lifestyle that my students do.  But they didn’t.  Their grandparents were generally middle class, or poor.  Keep in mind; some of these grandparents are still in their late 50s, so we’re not talking about the Great Depression era anymore.

Our “Outliers” unit was a lot like a family history compilation, but the written/researched focus was on specific moments that turned the tables for these families.  In nearly every case, some stroke of fortune enabled middle class (or in some cases, extremely poor people) to succeed and grow wealthy.  Only one of the kids had a grandparent who was well-off, and when he went back a single generation further, his great grandparents were only one step removed from the slums of India.

My good friend, James Dalziel, once told me about a U.S. based study suggesting that there’s a 3 generational cycle of wealth:

  • One generation builds the wealth
  • The next generation maintains the wealth
  • The third generation squanders the wealth

I told some of my students about this, and a Chinese boy raised his hand to tell me this, “fu bu guo san dai“.

Like gunpowder and bi-focal lenses (Benjamin Franklin didn’t really create the first bi-focal lens) the Chinese discovered something thousands of years before we had a study revealing the same thing.


 fu bu guo san dai


  • Literally: Wealth does not pass three generations.
  • Meaning: It’s rare that the wealth of a family can last for three generations (the 2nd may see the value of hard work, but the 3rd forgets it).
  • Explanation: In business, the first generation works extremely hard, so that the second generation reaps the benefits. By the time the third generation arrives, the wealth is squandered.

To maintain wealth, affluent children have to be part of what goes into it.  They have to see the struggle, understand the sacrifices, understand the value of money.

Most of my students are in the second or third generation of wealth.  They don’t deliver newspapers or take part-time jobs while growing up, like most kids.  It’s not the kind of thing wealthy kids (or wealthy international kids) in Singapore do.  They’ll have their college educations paid for.  And most of them will be able to choose the colleges they want to go to, rather than their parents choosing the cheapest or most convenient place to educate their kids.

And for many of these kids, the very first dollar they earn will be made at the ripe old age of 22.  What to do, what to do?  Used to flying around the world, staying at luxury resorts and riding in nice cars, that’s what they’ll want.  So they’ll buy on credit once the pay checks start rolling in and they’ll try living the lifestyle they were accustomed to as kids.

According to the Chinese proverb, even if they can maintain the wealth (and the standard of living they’re accustomed to) their children won’t.

So I’d put on my insurance salesperson’s hat when creating that first personal finance unit for affluent high school students.  I’d press the fear button, give them the history, tell them about the outliers, the Chinese proverb, and then challenge them with this, because people rise to challenges:

“Your parents had the easy part.  They grew wealth.  Now comes the hard part:  maintaining it.  Are you up to the challenge?”

Image by Pixabay

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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7 Responses

  1. I have heard of this too, and it does make sense. What can parents do to ensure that their generational wealth will not be squandered, without also being unduly hard on their own children?

  2. @Invest It Wisely

    They probably have to give them about as much as most middle class parents give their kids. No more, no less, if they want them appreciating wealth. But that might be tough if the whole family wants to fly to Jamaica for the weekend.

    But then, when you think about it Kevin, is it such a big deal if they let wealth slip through their fingers? I ponder that one too.

  3. Barry says:

    That's an interesting observation that makes a lot of sense. I know a family whose grandfather made a fortune in the early 1900's. His children lived off the fortune but didn't add much. The third generation is still wealthy, but only because of the vast real estate holdings he left. They survive by selling it off in pieces.

  4. @Barry

    That's interesting Barry. How long do you think it will last? Are the grandkids responsible with money? I guess they aren't, if they need to keep selling someone else's assets to survive.

  5. This seems to be true more times than not, unless you have an exceptional family. Maybe if you're filthy rich it would be best just to leave your kids enough seed money to start their own business empire.

  6. @The Biz of Life

    That might work Biz. But you might want to ensure that they were hungry first. How would you do that? It would be pretty tough.

  7. Great post Andrew.

    Rather than leaving a long winded comment, I've decided to do a post about it. Come by the blog and have a peek at it after you finish your vacation. 3 weeks in Laos, good for you!

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