Three-Generation curse and how to break it
How Conversations Shape Your Family’s Financial Future
Have you heard of the “three-generation curse”?
It’s a popular belief that wealth created by the first generation is often gone by the time the third comes around. The idea suggests that the first generation builds, the second preserves, and the third squanders it.
Consider Priya, a 43-year-old Real estate developer and mother of two.
Her daughter had just turned eighteen. Her son was sixteen. Both had never heard the word “no” when it came to material possessions.
“I’ve given them everything,” Priya says, “but have I taught them enough?”
She’s not alone.
But here’s what’s important. Having the right conversations at the right time can actually help.
While almost every parent intends to leave an inheritance to their children, few have a plan for how they can. The gap is real. And it’s expensive to bear.
When a family business changes hands or is sold, that doesn’t necessarily mean failure. It might mean:
Strategic diversification
Launching new ventures
Transitioning from a single operating business to a broader family enterprise or investment platform
What actually matters isn’t whether your family keeps the exact same business for three generations. It’s whether your family learns to move together staying connected to shared values and purpose while adapting to changing markets and opportunities.
So, it’s far more important for the future generations to understand the foundational principles of family values and purpose whether they’re continuing the original business or scaling new ventures.
Some of the world’s longest-lasting companies are family-owned, proving that with the right foundation- communication, clarity, and succession planning. Consider Hermès, still family-controlled after 191 years and thriving across generations through clear values around craftsmanship. Even closer to home in India, families like the Tatas and Godrej have navigated multiple generations by anchoring their businesses to a clear mission beyond profit.
Let’s start with the pitfalls to AVOID.
There’s a subtle trap many wealthy parents fall into- trying so hard to provide their kids with everything and spoon-feed them while ‘protecting’ the wealth that they unintentionally weaken the next generation.
When elders assume that the younger generation will waste money, they often respond with heavy conditions and controls and decision-making that stays locked with the older generation.
To the child, this might feel like hearing- “You can’t be trusted. You’re not capable. We must protect this from you.”
But this kind of paternalism can keep children emotionally stuck in a “permanent child” role and create dependence instead of responsibility.
So, the better approach is it’s intentional mentoring, instead of tighter control.
That looks like:
Trusting your children and getting ready to get challenged
Creating mutual spaces where the children can bring ideas, and propose new directions
Allowing experimentation with a portion of capital so they learn through doing, not just observing (discussed in detail below)
The families whose wealth crosses three, four, five generations successfully are often the ones who are not “handing over the keys to the kingdom.” They are creating a process where young adults are expected to grow, have room to prove themselves and learn to manage wealth as a tool, not an entitlement.
But as easy as it sounds in theory, the real question is how to make this into actionable steps. Here’s what intentional financial education looks like, stage by stage:
Ages 5–10: The Foundation Years
This is when you plant the seeds. Start with concrete concepts, not abstractions.
Give them an allowance, but make it meaningful. Use three clear jars labeled “Spend” (immediate needs), “Save” (long-term goals), and “Give” (helping others;).
Give your child their allowance (maybe ₹100-200 a week to start); count it together and suggest splits like 50% for spending, 30% for saving, 20% for giving. The amount should feel real to them, not abstract.
Sort cash into jars right away, discussing each: Spend for small treats now, Save for a bike (tape a picture on jar), Give for charity or gifts.
Place jars visibly; no dipping between them. If Spend runs out, wait for the next month’s allowance.
Discuss choices: “Spend now or save for bigger?”
Ages 11–15: Building Financial Awareness
Building on their three-jar mastery (Spend, Save, Give), open a youth bank account together (parent as custodian for under-13s); deposit Save jar money and explain interest and safety.
Show online/app statements weekly: Track balance changes from deposits (allowance) and withdrawals (Spend jar), discuss fees and digital money flow, so money is no longer just cash.
Start a simulated or small real investment portfolio using Save jar funds; pick companies they know (e.g., well-known Indian brands), research news or events moving prices, and log decisions to understand markets- not just to make money.
Have monthly family budget sessions: Discuss categories (e.g., 50% needs, 30% wants, 20% savings) excluding details, allocate their allowance alongside yours, and explain trade-offs like “cut dining out to save for vacation.”
Involve them in real wealth decisions (real estate, startups, philanthropy): Simplify your reasoning (risk, reward, ROI) and encourage questions to build their opportunity evaluation skills.
Demonstrate the compound effect: Show how small, regular savings grow over time. For example, investing ₹50 each month at 7% annual interest could grow to about ₹132,000 in 40 years (That’s the magic of starting early).
This exercise teaches them important fundamental skills like budgeting, managing bank accounts, evaluating financial decisions, tracking family finances, and grasping the power of compound interest.
Ages 16–22: Practical Mastery
Bring them into family office discussions and let them hear advisors think out loud about portfolio construction, tax efficiency, and risk management- this builds judgment that can’t be taught in a classroom.
Give them real capital to manage with your guidance. Allocate a meaningful sum large enough that gains or losses would actually matter, and let them experience both wins and losses. Real money teaches what simulations never can.
Introduce them to your professional advisors as future stakeholders, not just heirs. Let them sit in on conversations with your wealth manager, tax advisor, and business partners so they see how professionals navigate complexity and trade-offs.
Start the succession and legacy conversation now. Discuss your vision for the family wealth: What are you trying to build? What values do you want to preserve? What impact do you want to have?
Help them see they’re not just inheriting money, they’re inheriting a mission and stepping into a role as steward of something larger than themselves.
Check out more strategies on raising financially responsible kids with family wealth.
The bottom line is that there is a fine line between Wealth and Entitlement. And that is where values matter most.
Entitlement says: “This money is mine because I inherited it.”
Stewardship says: “This money is mine to manage, and I’m responsible for what I do with it.”
The difference between a capable wealth manager and someone who squanders a fortune often comes down to this single distinction.
Teaching this distinction does not have to come with a guilt for the privilege. It can be done by inculcating that wealth comes with agency.
If you’re a parent just starting financial education- whether for a 5-year-old, 15-year-old, or 21-year-old, it can feel overwhelming, but begin with these small, intentional steps tailored to any age.
This week:
Have one real conversation about money: Ask what wealth means to your child, listen actively, then share your perspective simply.
This month:
Set up (or refine) an allowance/budget with clear categories- saving, spending, giving- using jars for young kids or apps for teens.
This quarter:
Take them somewhere wealth feels real (bank branch, stock app demo, family property visit) and involve them in one decision, like researching a small investment or donation.
This year:
Map age-specific experiences: Three-jar basics for 5s, bank accounts/investing for 15s, advisor meetings/legacy talks for 21s - review progress quarterly.
Families breaking the three-generation curse start small but consistently, treating money talks like any vital skill.