Having a financial advisor and a financial advice firm that can look after your whole family can give you the peace of mind that the kids are prepared as best they can be.
Research shows that by 2050, around $224 billion will pass hands every year to the Millennials and to Gen Z. This is a significant financial number so effort is required to make sure we not only prepare them to accept this wealth, but also to create good habits in the short term to create their own wealth.
Parents play an important part in the education of wealth management either within the home or with appointed family financial advisors.
Here are some tips on how to get started to help the next generation prepare.
Start the family conversation.
This can be the uncomfortable part and every family is different in how this is done. Having an open and honest conversation about the transfer of future wealth with beneficiary children can avoid potential sibling conflict down the track.
We find that telling “your wealth story” helps in children understanding how hard it may have been to get to the current position and what had to be potentially sacrificed along the way. We find school fees and trips are one’s kids can relate to. Ultimately it is a baring of the values of the family and what has been important in getting the family to where you are now.
Educate around the money basics.
Don’t expect that this is the duty of school education to get right. All schools including private are getting better at this but still lack teaching a lot of the basics that are required for when the children leave school. We have found that money basics are learned from what kids see at home and is behavioural based. The power of saving and opportunity cost of money can be learned from an early age.
Where we find most value is in the mid-teens to mid-20’s. Engaging with your financial advisor and the advice business can help in this education and allows the coaching to be in line with your family values on money.
Set expectations and guidelines.
Not all inheritances are equal or happen at the same time. Many times, we have seen funds released early to one child to help when other kids may not need the funds. Having the family unit on the same page as to the “why” helps in the understanding and reduces any potential conflict or animosity siblings may have.
We find that discussions around what may be contained in the will is a personal decision and generally is discussed when the kids are older. The complexity can arise when there are mixed marriage families and multiple children to accommodate of various ages.
Show them where to get help.
Take the approach that you want to set them up for success. All kids learn differently so let them know where to go if they need help to understand more. This can be done very early in including the kids in family wealth discussions with your financial advisor or directing to another younger advisor within the practice to assist if needed.
We find that communication from the parents informing the kids on where to get help takes the stress and uncertainty out of the equation early should something unexpectedly occur.
Keep the communication lines open as life changes.
This is the big one in our view, as life does change, and family dynamics change as people get older and have families of their own. The needs and wants of the kids and their respective families change and will depend on the stage of life and what life has thrown up at them.
We have seen extraordinary changes that have needed to be communicated and discussed ongoing. Exceeding life expectancy, funding the grandkids education or assistance with mortgages as interest rates rise in lieu of an inheritance have been common. We find that deep conversations around our client’s Legacy wishes assists in getting the right family outcome.
Choosing a financial advisor and an advice firm that understands and can accommodate your families’ generational needs will be an important aspect of your family’s wealth transition success.
Contact us to discuss how we can help you and your family with your family’s Life-Plan.