Pass The Message: 3 Tips on Passing Down Financial Wisdom

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When is the last time you sat down and had a heart to heart conversation with your family about money? I ask this question because U.S. heirs are set to inherit more than $3.2 trillion within a generation. Yes, I said it! $3.2 trillion.

Regardless of where you fall on the giving tree, most inheritors will admit that they feel extremely unprepared to manage the inheritance process. This lack of preparation extends beyond our generic perception of race, culture and ethnicity and sheds light how taboo it is to talk about money in most American households. A lot of publications tend to focus on the lack of financial literacy in underserved minority communities, however, many high net worth families fall into the same basket of raising generations of children that will barely reach the average inheritance life span of 18 months. That means that all of your sweat, hard work, ingenuity, creativity, entrepreneurial efforts, savings and investing will be completely eroded within a year and a half of receipt.

Some would shrug this information off with the attitude geared towards the fact that they would no longer be living anyway and knowingly cannot dictate from the grave. But, as I have often encouraged you to consider, what we are building now should extend well beyond one generation. Perhaps not in dollars, but if anything, in terms of education and mindset. It’s about building a lasting legacy. And that boils down to planning, preparation, and dialogue. Not an internal dialogue – because a lot of us tend to reside in or own heads, but an external conversation that includes your family and advisors.

Here are three ways to break the ice:

Establish your financial village. To think that you could build, manage, and sustain an empire on your own is a great figment of your imagination. Even Julius Caesar had advisors (Antony and Cassius). Advisors and bankers can become your best teachers, taking a lot of the technical education off of your plate. Many have the time to sit down with you and your children (or yourself and your parent if you are reading this as a potential beneficiary) and guide you through general principals. I mean come on, how often have you gone inside the bank branch and seen bankers either sitting at their desks or coming to ask if you need help as you stand in line for the teller. Most people do not take the time to sit and speak to a banker without a financial transaction attached to the conversation. Another strategy would be to request a financial planner to come to your home and join a family meeting. These proactive steps may seem small now, but will pay off huge in the long run.

Be as committed as you are teaching them to be. When we set out to teach our children to save the go to method is typically an allowance for chores or odd jobs around the house. Take it a step further and use this as an opportunity to teach them about incentives. As a working adult our incentive to save is embedded in our 401(k) matching contributions that most employers offer. Side note: If you are not contributing up to the match that your company offers you are leaving money on the table that will compound over time into something greater. And just like the matching contribution gives you the extra nudge to save, our children will see the benefits in saving when it’s coupled with greater accumulation. So commit yourself to their cause and offer a matching contribution to their savings.

The value of giving. A huge part of passing down generational wealth is making sure your personal values and philosophies are also translated. Encouraging a family discipline of volunteerism and philanthropy that includes children and grandchildren in your service oriented activities gives them a holistic picture of who you are and can serve as another preservation technique in terms of instilling a value that extends beyond the dollar. We teach by doing and this is an act that can easily become inclusive of the entire family.

Now Keepers, we all know that there is more than one way to skin a cat. The three ways mentioned above are meant as a starting point. If you have conversation tips that have worked for you and your family comment below.

Let’s keep doing the work.


Photo Source: Freepik

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