In the next two or three decades, it's expected that a great wealth transfer will occur. It should come as no 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 in United States' history. 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. As a result, 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 educate your children or grandchildren financially, you should 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 their inheritance later.
Consider holding family meetings about finances and invite financial professionals to join in so they can pass on some knowledge to your children. Talk to them about setting up trust accounts with third-party trustees. Your heirs should start learning about these trusts as soon as possible.
Teach Your Children To Save
It is important 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. Consider matching their savings dollar for dollar or giving a bonus as savings milestones are reached. 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.
Work and Allowance
As soon as your child is old enough to receive an allowance, you can start educating them about finances. If you're a business owner, the best way to teach your children about finances is by involving your children in your business. Hands-on experience is often the best way for kids to learn. If your child is older, you can even put them on the payroll so that they learn to put money aside. If your children are younger, an allowance for performing their chores is a great way to start teaching them about finances, saving, and spending.
Early lessons about finances and sharing your financial values when your kids are younger will help ensure they have the knowledge and skills needed to build on their wealth when the time comes.
For more information about how to pass on your financial values to the next generation, don't hesitate to contact us.
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