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How To Pass On Your Financial Values to the Next Generation

In the next two or three decades, it is expected that a great wealth transfer will occur. It should come to no one’s surprise that a significant proportion of this wealth will be coming from baby boomers. The oldest baby boomers are 70 years old and the baby boom generation is the richest generation in the history of the United States. No matter how much or how little wealth you plan on passing down to your children or grandchildren, you should make it a priority to pass on your financial values to the next generation.

Have a Fully-Developed Plan

Many people don’t have a fully fleshed-out plan in place to transfer wealth to their children or grandchildren. Thinking about and planning for life after we have passed is something we as humans often put off, and thus parents are often hesitant to discuss money and finances with their children. Unfortunately, this silence can have dire consequences.

Imagine a situation where an individual knows nothing about personal finances, and then they suddenly receive an inheritance of $10 million. Such an heir may find themselves wasting the money or leading a dangerous lifestyle. Sudden wealth can destroy an individual emotionally if they’re not ready for both the privileges and responsibilities that come with the money. Therefore, it is essential that you start preparing your heirs long before you pass away.

Work with Professionals

If you’re not sure how to go about financially educating your children or grandchildren, you could consider working with professionals. The best teachers are often those who work in finance – bankers, financial advisors, and wealth managers. This is particularly true because your heirs may find themselves turning to these professionals for help upon receiving the inheritance later.

Consider holding family meetings about finances and invite financial professionals to join so they can pass on some knowledge to your children. The families that tend to be the most successful with transferring wealth often set up trust accounts with third-party trustees for their children. Your heirs should start learning about these trusts as soon as possible.

Teach Your Children To Save

It is essential that you teach your children the power of saving. The best way to show your children the value of saving is by teaching them about compounding interest. One way you can encourage your children to save is by promising to match their savings dollar for dollar. Receiving an extra $20 for every $100 saved will make your children excited about saving. The goal is to turn your children into committed savers by the time they receive their inheritance. That way, they will understand the importance of not wasting the inheritance on frivolous things. It’s never too late to start to teach them as well. The earlier the better but even if this lesson begins in their 20’s it can still be very valuable.

Write Them Down

Most people spend a lot of time finding ways to pass down tangible assets in a way they feel will be most efficient, which is great. But what about the intangibles, the values, the ideas? Be sure to take the time to write down these generational ideas that you want your kids to know and follow. This can be done in a simple letter format or even as a list. However you do it, be sure to put down in writing what you want to pass down that isn’t tangible.

It is definitely important to have a plan for your inheritance. But to help truly pass on your legacy, it’s imperative you pass on your financial and core values. This is crucial to ensuring the wealth passed on to the next generation is making its way into the right hands. For more information about how to pass on your financial values to the next generation, don’t hesitate to contact us.

Source: Twenty Over Ten. Past performance is not indicative of future results. For informational purposes only. Not intended as legal or investment advice or a recommendation of any particular security or strategy. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. For more information about Wealthquest, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov or contact us at 513-530-9700.

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