This is part of our ongoing series exploring the elements of true family wealth. Previously we covered the obvious and most easily measured one, financial capital. Today we’re on the most important one, according to family and wealth expert, Charlie Collier. As you consider your own family, this category deserves lots of attention. So what is it and why is it so important?
Human Capital—The Most Important Part
The most important component of family wealth is human capital. In other words, your family members. The people in your life are not only the source of the family’s actual money, or financial capital, but they literally represent your family in the world. They take actions and make decisions that affect your family, your community and society at large.
Who Is Family?
Here’s something not often stated directly, but it’s true: you decide who your family members are. They can be close or distant, in touch or out of touch, but somehow related to you and to each other. Most people define their family by generation—my generation, my parent’s generation, the next generation with kids, nieces, nephews and so on. With marriages you can increase the number of people you count as family, and with divorce sometimes you decrease the number, sometimes not. Ultimately, the bounds of your family are defined by you, not by DNA or family tree diagrams. (For related reading, see: How to Factor Family Into Your Retirement Plan.)
Understanding Your Family's Human Capital
How well do you know—really know—your family? Can you answer these questions about each member? What are their values? Their passions, dreams, spirituality and goals? Do they themselves know? What can you learn from them? When did you last talk with any of them about these things? If you are feeling a little overwhelmed because you can barely answer any of those questions yourself, don’t worry, that’s the point. Human capital must be nurtured. It doesn’t grow on its own, in the dark, by accident. Next time you talk to a family member, ask them one of those questions. Start a conversation, listen more than you talk, and see where it leads.
Ways to Nurture Human Capital
If you are feeling skeptical about this, I understand. You’re busy. You’re not great at weighty conversations. You don’t know where to start. You’d rather talk about the Patriots or the president or your business. However, if you really want your family to be truly wealthy it’s going to take some work. Every family is different, but here are some great starting points for nurturing your family human capital:
- Tell a story – Share and compare a story with a family member about the first time she knew what she was going to do for a living. Paid or unpaid does not matter.
- Make it a game – Have a younger family member ask everyone to guess his favorite animal/movie/video game/emoji. After everyone guesses, he reveals the answer and says why.
- Write it down – Encourage family members to record (via letter, email or any other form) how they practice spirituality, where and how often. Share across the family and save for future generations.
- Create a safe zone – Let family members know that a family gathering is a no-blame, no-shame environment where they can describe their values, dreams and priorities without being judged or challenged.
Such a session can start off a little hokey and awkward but it may quickly get very real and poignant. Find out for yourself. (For related reading, see: 6 Ways to Boost Your Human Capital.)
An Advanced Technique for Nurturing Human Capital
For those already nurturing family human capital in some form, Charlie talks about one question that can connect and transmit family values up and down the age ladder. Charlie believes that the parents' and family’s most important job is to raise children to do “meaningful work.” To foster this, mom and dad should ask their children of all ages "What are you good at? What is your talent? What is your passion? What is your gift and how can we invest in it?”
Imagine if you were asked that question! What would you say? What would you do with the answer? Now we are truly deep into the exciting, wonderful and mysterious caverns of true family wealth.
(For more from this author, see: How to Stop Doing Nothing With Your Investments.)