You may have heard the old proverb, “Shirtsleeves to shirtsleeves in three generations.” In Japan, the expression goes, “Rice paddies to rice paddies in three generations.” The Scottish say “The father buys, the son builds, the grandchild sells, and his son begs.” In China, “Wealth never survives three generations.”
Around the world there are many variations on this theme, all used to describe the tendency of third generation to squander the wealth obtained by the first and second generations.
The Three Generation Cycle
The First Generation comes from a life of hardship and is determined to have a better future. They are willing to work hard and make the sacrifices necessary in order to achieve their dream. By their later years, their efforts pay off; they are able to enjoy the fruits of their labor, often with assets to pass on.
Their children, the Second Generation, grow up a witness to their parent’s struggle and understand the importance of hard work. Although they live a more comfortable lifestyle, they may still remember a childhood filled with frugality. Because of this awareness, they make financial and educational choices that help them build upon the foundation their parents worked so hard to create. By their later years, the second generation has acquired even greater wealth.
The Third Generation, however, has no memory of want or struggle. They only know a life of plenty and often lack an understanding of the work that went into building the lifestyle they now enjoy. It is this third generation that has become known to squander the wealth their parents and grandparents worked so hard to build.
Avoiding the Three Generation Cycle
By keeping family stories and history alive, younger generations are better able to understand their parents and grandparents’ efforts as well as the work needed to build and maintain family wealth. For families facing the Three Generation cycle, awareness of one’s past should be included in any strategy for the future.