A financial matter that often fails to receive the attention it needs is the responsibility of the younger generations taking on the family’s money. While focus is more often on the financially responsible, children also need education on money – without which they cannot form money wise habits. The development of good financial behaviour in those receiving money is crucial in the continuation of the prosperity within a family.
When motivating children to take responsibility with money, some matters to consider include:
Finances are an unpopular talking point, especially for families. However, by avoiding this topic, you can create a lack of preparation and knowledge in the next generation. This could mean when they unexpectedly encounter a trust fund or an early inheritance, it could derail their lives negatively. Coming into a significant lump sum of money is frequently seen to be a detrimental life event to those who have not learnt proper financial management skills. Being spoilt or misusing the money is a reasonable concern for parents, but with the right guidance, your children can progressively develop their money skills.
A clear statement regarding your intention for the estate you will leave behind is an effective means to protect your wishes and family’s financial interests. Ensure you speak to your family about how you want your assets to be distributed and ensure any documents are completely aligned to what you want. Many inheritance issues come from breakdowns of trust and communication, a clear message can help avoid these scenarios.
Educating your children while they are still young is critical to the development of financial responsibility. Investments and inheritance can be complicated concepts for younger people but learning about these skills early will contribute to a respect for money.
As a part of educating your children, we recommend running through your financial plan with them. Teaching them motivation for appropriate handling of family wealth should begin with comprehensive guidance. An easy way to do this together with them in their younger years might be budgeting for their birthday party. While the handling of financial duties can be tedious and boring, it can be invaluable for children to see it first-hand. You can explain the implications of the planning process to them, which can enhance their appreciation.
Consider what financial professionals are needed for your circumstances and expose and introduce your family to your trusted advisors early. Your accountants, investment managers and estate planners often will have valuable lessons to teach your children – learning about these vocational functions can certainly help inspire motivation to manage family wealth.
Managing family wealth is not an easy task, however, creating an environment in which your children can help take responsibility for the family’s money can give them guidance and support for long term planning. For more information on teaching your family about wealth management, reach out to a member of the Morrows Family Office team.