Published On
August 10, 2015

You may be able to instill the type of values in your children that lead to the productive use of your funds; however, this might be easier than it sounds. It can be difficult to instill the right values in children on any subject, but money can be especially difficult. We all find it difficult to make our own positive financial decisions. Convincing others to do so by setting a good example and providing appropriate guidance can be even harder.

The wealthy often find family finances a difficult topic to introduce. Some may have concerns over the actions their children will take with their inheritance and what types of behavior the knowledge of its existence will encourage. CNBC conducted a survey of millionaires in 2015 that had interesting results.

44% of those families surveyed with greater than one million of investible assets have not told their children that they would receive the inheritance. Another 27% waited to tell their children until they were over 30.1

If you think these numbers seem high, imagine the lack of financial communication among spouses or business partners, for example. In these relationships, an immediate mutual financial consequence exists for the decisions made. With children, we understand our decisions and guidance will have an impact, but it can seem too distant to prioritize.

Financial issues are difficult to address in most circumstances, but conversations with children can be particularly problematic. Not only can such conversations be awkward for both parties, but many parents who wish to instill a strong work ethic in their children believe that the knowledge of a large inheritance will undermine this objective. Why work hard if I will eventually receive a substantial inheritance? Many parents may be concerned with examples of inherited wealth they are familiar with either through personal first-hand knowledge or what they see in the media.

These beliefs can also limit the longevity of family wealth. Children who liberally spend the inheritance they received from their parents may not only reduce the sums they pass to their own children but provide a less than desirable financial example.

To avoid these possibilities, it’s important to start with values, which can be followed by goals and purpose.

Consider a mission statement. Potentially using the guidance of a financial professional or estate planning attorney, you can create along with your heirs a family mission statement. This can be a good way to introduce the topic of the values associated with your families wealth attained thus far, as well as its appropriate stewardship.

financial planning in your 20's and 30's

This statement can be of any size. The main objective is to effectively describe your overall values and how family wealth relates to it. What are your objectives for the near or distant future for the family business? What would you like to accomplish? What type of legacy would you like to leave behind? On the surface, these questions seem like abstract exercises, but they may have clear and specific financial implications.

CNBC found that many parents, including 32% of those 55 or younger, intended to specify what their heirs could use their inheritance for.1

Don’t shy away from control. Consider multiple phases of distribution. Trusts can be an effective tool to accomplish this. A certain amount of principal is received by the heir at a specified age, a certain amount at a later date, and so on, as specified in the trust.

46% of high net worth parents are concerned about giving their children too much money at once.2

But what exactly is “too much?” That varies from family to family, but the same study showed that parents wished to avoid giving “the kind of money that would dissuade their heirs from realizing their full potential in their lives and careers.” Even if you are not concerned that your offspring may spend their inheritance irresponsibly, giving them access to funds over an extended period of time can also provide protection for grandchildren or others who are likely to next receive your assets. This can avoid the risk of your assets eventually benefiting a child’s spouse in divorce rather than your own grandchildren or other heirs.

In order for this discussion to be successful, it needs to occur. That isn’t to say that words alone can have the desired objective. Setting a good example for future behavior is important, as is instilling the habits you would like to encourage early on. Inheriting substantial investments will not, for example, make someone an investor. Introduction to the habits to be successful in this area early in life is essential. Lastly, involving financial professionals in the discussion and implementation of desired strategies may be an advantage. All of these steps together can help ensure that your wealth lasts for future generations.


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1 – [7/22/15]

2 – [8/6/15]