The subject of money can be an uncomfortable one. Most people would consider a discussion about your salary, finances, or your personal wealth to be an awkward and inappropriate one. This conversation is not one many people would even have with longtime friends. Some parents may find it distasteful to discuss money matters or inheritance with their children. However, if your children are going to be prepared to handle their inheritance in a thoughtful and responsible manner, it is a discussion that is worth having.
If you have been paying attention to financial news, you will see that in the next few decades there will be the largest transfer of wealth in history. This transfer is a result of baby boomers passing on trillions to their offspring. This makes the discussion of inheritances between parents and children an important discussion.
Some of the reluctance to discuss the passing on of large estates is founded in worthy and altruistic motives. Many parents who have built substantial fortunes started with nothing. They worked hard and made their money through old-fashioned principles of diligence, saving, frugality, and honesty. Many are concerned that their children will lose any motivation to learn these same principles if they know that a large inheritance will be coming to them. Many of these parents are simply seeking to ensure that their own children learn to be productive citizens and earn their own way.
There may be other parents of smaller estates who are not sure how far their assets are going to stretch. It doesn’t take much research to realize that retirement, unpredicted medical expenses, possible nursing home expenses, and end-of-life expenses can quickly devour your assets. These parents may not want their children to be depending on an inheritance that never materializes.
While these thoughts of reluctance are certainly understandable, a child who is unprepared for their inheritance may not be able to use it wisely and to its fullest potential. A sudden obtaining of a large inheritance can cause a child to exhibit some of the very irresponsible behaviors that a parent is seeking to avoid. With some children, an unexpected and large inheritance may leave them feeling disoriented and unsure of how to use it properly. Some may feel isolated and uncertain of what friends to trust for advice. Even a modest inheritance can produce a flurry of irresponsible spending, such as on luxury cars or expensive vacations.
Money experts believe that it is wise for parents to discuss wealth and finances with their children. You don’t have to be overly specific. They don’t need to be promised a certain amount. However, it is appropriate to teach them financial principles, money-management skills, and life values. They should learn what money can accomplish for positive purposes. Teaching small children how to handle small amounts of money can be a great place to start.
Nothing can instill these values like the consistent example of a parent doing things the right way. You can model wisdom, restraint, generosity, and family values by the way that you spend your money.