Many parents are uncomfortable discussing their wealth with their children. Property and money are usually taboo topics to discuss. Asking someone else about what they have is often considered impolite. But failing to talk to kids about how much they may inherit could leave them unprepared to handle even a modest amount, and often results in the money being squandered quickly.
Baby boomers are considered the wealthiest generation and are set to pass that wealth on to their children. It’s estimated that $68 trillion will be passed down from boomers within the next few decades. By 2030, millennials will hold five times as much wealth as they do today.
Many who have substantial wealth are concerned that if their children know the extent of their wealth, this will take away any motivation for the children to be productive and involved citizens. Parents with substantial wealth often want their children to learn how to live in the world as “normal” people, and to be productive and successful in their own right. Some may go so far as to hide their wealth to encourage their children to work and build their own wealth.
But the degree of wealth is relative. Even those who are not as wealthy may not want their children to know how much they have. With the rising costs of health care, they are concerned that all of their savings will be needed for retirement, medical expenses, and long-term care. If this becomes a reality their kids would not receive an inheritance they may have been counting on.
Failing to prepare children for what they may inherit can hinder their ability to handle money wisely. Many find they suddenly feel separated from their friends, isolated, and even confused about how to handle relationships. Others will be wasteful and spend their newfound money irresponsibly. Those who inherit even a modest amount are likely to be just as irresponsible; stories of inheritances being squandered on an expensive sports car, lavish vacations, and fast living are all too common.
Experts agree it is important to talk to children about money and wealth during their adult years to help them learn how to be better stewards of wealth. This doesn’t mean parents have to show their children all of their bank accounts, business interests, and other evidence of wealth. Instead, experts suggest talking to children about their values, the opportunities money can provide, and what you as parents want to accomplish with the money you have. Most parents want their children to think about helping others, and many want to encourage entrepreneurship. It can be helpful to give children a small amount of money at a young age to teach them how to save and invest, spend wisely, and show them the importance of supporting charities.
One of the most effective ways to teach children about values and spending and investing money is to be an example. Parents need to let their children see them using their money in ways that reinforce their values. Some 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. Others involve their children in choosing charities to support and provide children with their own money to donate. If your children see you living your values, chances are they will adopt similar values as well.
We help families determine how to leave money to children in a beneficial way, how to plan for unexpected healthcare issues, and how to make sure appropriate people are named to step in and help if needed. Contact our Chicago area office at 630-568-6656 to discuss how we can help you with any legal questions you may have. We look forward to the opportunity to work with you.