EP Wealth’s Adrian Larson shares how to help prepare the next generation for responsible inheritance through early education, open conversations, and gradual involvement in financial decisions.
Preparing the next generation to handle wealth can be one of the most important aspects of a family's financial planning. While creating and growing wealth takes skill and dedication, transferring that wealth effectively—along with the values and knowledge needed to manage it—requires thoughtful preparation and ongoing communication.
When it comes to teaching children about money, the foundation should be built early. Elementary school age isn't too soon to begin involving children in basic decision-making processes around money. This can be as simple as helping them understand what's valuable to them and what they're willing to spend to obtain it.
Consider implementing an allowance system or working with children toward specific goals, reinforcing the connection between effort and reward. For example, you might say, "I'll put this much money in an account for you if we accomplish everything we want to by the end of the weekend, and then we can do something fun."
These early lessons may establish a framework that makes later, more complex financial conversations easier. When children understand the value-reward relationship from an early age, they could potentially develop a stronger foundation for responsible financial management.
One of the most effective strategies for preparing children for inheritance is establishing regular family meetings about money. These conversations shouldn't come from a place of judgment but rather from a place of open communication. Making financial discussions routine and consistent can help build a way for more complex conversations as children mature.
This practice becomes particularly valuable as children reach significant milestones—their first job, first major purchase, college decisions, and beyond. The comfort level established through these regular discussions may potentially make it easier to address more substantial financial matters later.
Many families find it helpful to normalize money conversations at the dinner table or during family time. You don't need to share exact dollar amounts or budgets if that exceeds your comfort level, but discussing financial concepts openly helps children develop healthy attitudes toward money management.
Finding the balance between protecting family wealth and teaching financial independence presents a common challenge. The key often lies in allowing children to make their own financial decisions while providing guidance about potential consequences.
The more parents try to control their children's decisions, especially during their teenage years and early twenties, the stronger the urge to rebel might become. Instead, encourage your children to make financial decisions while vocalizing their thought process. This approach helps them develop decision-making skills while giving you insight into their financial reasoning.
Simultaneously, ensure your children know who's on your financial team. Introduce them to your financial planner, estate attorney, or other professionals who help manage your wealth. Many financial planners welcome the opportunity to connect with the next generation and can serve as valuable resources. Your children will also know who to call with questions or concerns, particularly if something happens to you.
One of the most common challenges in preparing children for inheritance involves conflicting philosophies about money's purpose. Some family members might prioritize charitable giving, while others focus on personal uses or building generational wealth.
These differences often appear more significant than they are. Parents often assume their children won't agree with their financial values, but the next generation often adopts similar perspectives. After all, they've been raised in an environment that shaped their financial outlook.
The challenge lies in creating opportunities for open conversation about these values. Even if complete agreement isn't possible, finding common ground typically proves easier than expected. These discussions may help both parents and children develop comfort and confidence in their financial relationship.
As children grow, milestone moments offer natural opportunities for financial education. Their first job offers a chance to explain tax forms, saving strategies, and budgeting. College planning presents a valuable opportunity to discuss the cost of education, potential student loans, and the long-term financial implications of different choices.
Even everyday family decisions can become teaching moments—especially when they involve trade-offs between things of value. Take a simple example: asking your kids if they'd rather take a family vacation to Europe or put in a pool at home. That kind of conversation can lead to a discussion about what each choice really means. A pool might be fun more often, but it comes with extra chores and upkeep. The lesson here is that it’s not just about how to spend money, it’s about exploring priorities and understanding consequences.
As your confidence in your children’s financial decision-making grows, your ability to trust them with larger responsibilities—including eventual estate planning considerations—will likely increase as well.
Remember that money, at its core, involves trading something of value for something else of value. By helping the next generation understand this fundamental concept and its implications, you can help prepare them to manage inheritance and to make thoughtful financial decisions throughout their lives.
To learn more about how we can support your financial goals, contact an EP Wealth advisor today.
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