Teaching Financial Values
General Estate PlanningNo 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 for transferring wealth to their children or grandchildren. Thinking about and planning for life after we’ve 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 $1 million or $10 million. Such an unprepared heir may end up wasting money or leading a dangerous lifestyle. Sudden wealth can emotionally destroy an individual who’s not ready for both the privileges and responsibilities that come with the money. Therefore, it’s essential that you start preparing your heirs long before you pass away.1 Making time to hold candid conversations is where it all begins.
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 important because your heirs may find themselves turning to these professionals for help upon receiving the inheritance.2
Consider holding family meetings about finances and invite financial professionals who can share some knowledge with your children. The families who tend to be the most successful with transferring wealth often set up trust accounts for their children with third-party trustees. Your heirs should start learning about these trusts as soon as possible.
Teach Your Children To Save
It is essential that you instill the value of saving in your children. The best way to do this is by teaching them about compound 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 their inheritances on frivolous things.
Work and Allowance
As soon as your children are old enough to receive an allowance, you can start educating them about finances. If you’re a business owner, the best way to do this is by involving them in your business. Hands-on experience is often the best way for children to learn about finances. If your children are older, you can even put them on a payroll so that they learn to put money aside. If they’re younger, an allowance for performing their chores is a great way to start teaching them about finances, saving, and spending.
The most important thing that you can pass on to your children is not your money but your financial values. Therefore, it’s essential that you start teaching your children about finances when they’re young.3 That way, when they receive their inheritances, they’ll have the knowledge and skills needed to build on their wealth for the next generation. Don’t hesitate to contact us for more information about passing your financial values on to the next generation.
- https://tobininvestmentplanning.com/financial-tips/teaching-your-children-about-money
- https://tobininvestmentplanning.com/financial-tips/4-questions-to-determine-if-you-need-a-financial-advisor
- https://tobininvestmentplanning.com/financial-tips/great-books-to-teach-financial-literacy