If you’ve created an estate plan, then you know how stressful it can be just thinking about how the next generation will handle the family’s wealth. Many people set up long-term trusts with flexible distribution standards making it so that beneficiaries must reach a certain age before they can access the entirety of the funds left to them. Having an intelligently designed estate plan that gives younger members of the family a chance to mature before handling their inheritances is a good idea, but it’s just a start. Most parents want to leave their children with money, but they also want to pass down their financial values. Figuring that process out can be even more of a struggle than the paperwork.
Our number one tip is to communicate with your children. You’ve probably heard this before, but it’s just as true about family finances as it is about any other aspect of parenting. Don’t spend too much time worrying about how young your children are. Whenever you feel ready to start discussing money with them, go ahead and start educating! You’re probably constantly surprised by how quickly your kids learn new things. You know better than anyone when they’re capable of learning little financial lessons, and who better to teach them than you, especially if you plan on including them in your estate plan!
Do you have a vision for the younger generation of your family? Share that with them! This can be as simple as explaining why you’re including cash or a check in a holiday card instead of just tossing it in the envelope and signing your name. Of course, conversations surrounding money can change subject matter and tone as the younger generation ages and matures. At some point, share with them how the family accumulated its wealth and how the current adult members handle the finances. This is a simple way for them to begin to understand, and care, about the family values.
Whatever your beliefs and attitudes are about finances, there are ways to share them with your children and grandchildren...
- If hard work is important to you, don’t just give children an allowance, have them earn it. A common example of this is having them complete specific household chores on a weekly basis.
- If saving is important to you, have older children chip in for big-ticket items around the house. If they want the latest and greatest video gaming system, ask them to save up so that they can pay for part of it. They’ll feel proud when they can really call it their own!
- If positively impacting your community is important to you, get your children involved with charities that you support. Explain the donation process to them and have them volunteer with you!
Another way to prepare the next generation for their inheritances is to introduce them to your financial advisor. Professionals can help young people manage their finances by assessing their risk tolerance and helping them with their investment choices when you’re no longer around to do so. We understand that dealing with the unpleasant task of thinking about what will happen to your family after you’re gone is no fun, but it is important to take into account that unexpected things happen. Plus, you don’t have to go it alone. We’re here to help with these kinds of discussions and decisions.