By Captain George and Elizabeth Stoll

One of the most chronic problems faced by wealthy parents is the fact that they are so busy earning and preserving their wealth that they haven't passed on their hard-earned investment principles to their offspring. As a result, children of wealth are often poorly educated in the principles used by their parents to earn and preserve their riches. The result is often "from riches to rags" in one generation.

To help remedy that problem, Wealth asked Captain George and Elizabeth Stoll to write a regular column designed for parents and children. The Stolls are uniquely qualified for the assignment, having spent the last 15 years leading full tutorial programs aboard one of two large sailing ships. During the last decade and a half, they have seldom been more than 150 feet away from a hundred or more children in their maritime classes, giving them an unparalleled perspective on the issues.

Their first column for Wealth deals with allowances. Address your questions for future columns to Captain George and Elizabeth Stoll do Wealth, 4425 W. Napoleon Ave., Metairie, La. 70001.

George&BettyOnTeQuestBow40.jpg (12251 bytes)

George and Betty Stoll, who operated boarding school on two sailing ships, are new Wealth columnists with a series on teaching your children to be financially independent.

Q. At what age should we give our children an allowance?
A. Never, if you define allowance as "unearned income," because this type of attitude will lead them to believe the world owes them a living, and that money grows from purses and wallets. Help your children learn how to earn pennies and nickels for jobs around the house. Don't overpay them for small favors, keep accurate records, and reward them according to the job.

Q. What if we already give them an allowance?
A. You may be faced with a situation in which your children have learned that they deserve money for nothing. If your children can't support themselves outside the home, reduce their

unearned subsidy gradually, and tell them when the money will disappear altogether to give them time to find paying work. Some parents give children an allowance "to teach them financial responsibility." We feel financial responsibility can also be taught by a lack of money, and can be defined as "counting the cost and paying the price." Responsibility demands planning, self-discipline, and waiting for deferred gratification.

Q. All right. So how much should I pay my child to cut the grass?
A. Assuming your child lives with you, remember that it is partly his or her yard, and that he or she should take pride in, and responsibility for, that portion of the living space which is his or hers. The parents can, of course, pay the child for cutting, trimming and sweeping their share of the yard, but they should not mislead their child by paying a commercial hourly rate, or even minimum wage. Instead, parents should pay about one-fifth of the hourly rate they would pay an outside contractor for the same job. This is based on the idea that parents are paying most of their children's expenses and that they should have the same amount of discretionary income, after expenses, as would a worker in the "real world." This will help children learn about "real wages" and "take-home pay," and will help prepare them for the disappointment of seeing their paycheck fractured by withholding taxes.

Captain George and Elizabeth Stoll have taught more than 1,000 children aboard their co-ed boarding school on the sailing ships TeVega and TeQuest during the last 15 years. They publish a monthly, serialized newsletter called Your children's Future for parents who want to guide their children's academic and personality development along the lines of individualism and free enterprise.

Page 72 -  WEALTH / FALL 1984