Not many parents like to talk to their children about their wealth. How much money people have is typically considered a very private matter, and most people don’t think it’s polite to talk about it. However, not talking to children about their potential inheritance could leave them unprepared to handle inheriting even a modest amount of money.
This is especially important now more than ever because the children of baby boomers are due to inherit more wealth than any generation before them. It is estimated that baby boomers will inherit $12 trillion from their parents, and leave an additional $30 trillion to their own children over the next 30 to 40 years.
Many people who have substantial wealth are concerned that letting their children know how much money they stand to inherit may take away any motivation for the children to become productive and involved citizens. Most people want their children to learn how to live as “normal” people and to be productive and successful in their own right, not rely on a potential inheritance.
Even people with modest funds may not want their children to know how much they have. They may be concerned that all of their savings will be needed for retirement, medical expenses and end-of-life expenses. If that happened, their kids would not receive the inheritance they were counting on.
But not knowing what they may inherit leaves children in the dark and can actually hinder their ability to wisely handle the inheritance. Those children who inherit a substantial amount might not be prepared or know what to do with that much money. Many children may also find that they suddenly feel separated from their friends, isolated, even confused about how to handle relationships, and some may become wasteful and lazy. Those who inherit even a modest amount are likely to be just as irresponsible. Everyone has heard stories of inheritances being squandered on an expensive sports car, lavish vacations and fast living.
Experts agree about the importance of talking to children about money and wealth, at least in general terms. Parents don’t need to show their children bank and financial statements, but should talk to their children about their values, the opportunities money can provide and they want their children accomplish with it. Most parents want their children to think about others, and some want to encourage entrepreneurship. Some parents may give their children a small amount of money at a young age and teach them how to save and invest, give a certain amount to charity and spend the rest wisely.
The most effective way to teach children about money is to be an example for them. Let your children see you spending money in ways that reinforce your values. Many parents show how they value family relationships by spending their money on family vacations or buying a second home where the entire family can gather for summers and holidays. If your children see you being charitable and helping others, chances are they will become charitable, too.
Creating an estate plan is an important part of setting up an inheritance for your children. Call Abigail Neal today at (480) 699-7992 to learn how we can help you plan for tomorrow.