Experiential Learning in Family Wealth Education

While younger generations may not be jumping at the chance to learn about finance and business, mastering the concepts necessary to become a responsible inheritor, business shareholder or strategic philanthropist is well worth the time. These topics can be complex and are typically not taught in school or at home. On top of that, they can carry emotional baggage, such as thinking about a parent’s demise when learning of their estate plan, striving for independence in the context of a trust fund, or fear of embarrassment based on spending or investment decisions.

So how does one overcome these challenges? Skills learned by doing can lead to competency, and more importantly, confidence. This approach is often called experiential learning and is a form of hands-on education, but with an emphasis on relating learnings to one’s own life. This approach can alleviate some of the anxiety of financial education and can set the stage for life-long learning.

Experiential education is broken down into four steps: activity, reflection, conceptualization, and application. Financial literacy, specifically budgeting, is a common place to start because it is pertinent to most audiences, regardless of where a person is on the wealth spectrum. The following example is called “Game of Budgets” and is loosely built around the television show Game of Thrones.

Activity: Working individually or in groups, participants are assigned to make a year-long budget for either Arya, Sansa, or married couple Dany and Jon (imagination is needed!). Given a budget template, gross salary, city, and several mandatory costs (e.g. Dany must have a fireplace in her home, and Arya is saving for a trip “west”), participants create a spreadsheet with a balanced budget projection. Also known as the “adventure and challenge” stage, this step engages participants and encourages creative thinking.

Reflection: Facilitated conversations can help participants reflect on the activity. Examples include, “What costs surprised you the most as you were doing the research? Do you think more income is needed to live the life your character hopes for? How much has been allocated for savings, and is this enough given their long-term goals? What are the risks of having so many fixed costs?” Possibly the most impactful stage, reflection allows participants to articulate and solidify key learnings.

Conceptualization: This takes the reflection stage a step further and challenges participants to consider how the activity relates to their own lives. Questions may include, “What are your own fixed costs each month? Dany and Jon’s housing costs were much higher than Arya’s – why does a young family need so much more? How long is your list of variable costs compared to the characters, and what does this say about your own priorities?” This stage encourages participants to empathize with the situations and priorities of others, as well as their own.

Application: Now that they have competence filling out a year-long budget projection, participants are asked to complete a spreadsheet for their own lives. In an ideal situation, they can be matched up with accountability partners to check-in quarterly on their budgets. This solidifies the concepts of cash flow management, but also promotes collaboration and leadership. The application for budgeting can be taken a step further when, after six months or a year, participants can be tasked with creating a budget for a mock business idea or philanthropy. This stage will look very different for each group and individuals depending on interests, life-stage and priorities, but the key is to bring the lessons into their lives and make them personally relevant.

The process of experiential learning can be applied to other important topics, including:

  • Family history: Create an “Amazing Race” scavenger hunt with the clues and activities relating to stories from the family’s history.
  • Entrepreneurship: Have the next generation make jewelry or crafts to sell to friends and family. Focus on costs of goods sold, revenue and profit. Throw in a tax on profits for an added layer of reality!
  • Philanthropy: Break the family into multi-generational teams and have them work together to build a bike. This can help foster collaboration and teach effective communication. The teams can then personally take the bikes to a local nonprofit to experience giving in action.

Many families face an uphill battle convincing siblings, cousins and children to attend sessions on financial literacy and governance. Experiential education not only provides a proven framework to help ensure key concepts are learned, but is also likely to provide adventure, laughter, collaboration and confidence for the whole family.

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About Cresset

Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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