Financial lessons for the next generation
Passing money from one generation to the next can be a difficult issue for parents, particularly when it comes to ensuring children are ready to take on the responsibility of handling family wealth. However, while discussions about money can be uncomfortable, the key to instilling financial responsibility undoubtedly centres on education and communication.
Sooner rather than later
Although each individual family’s dynamics and circumstances will be different, the best course of action is typically to begin the process at an early age. This involves talking about a variety of age-appropriate topics in order to initiate and simplify the financial education process.
During their school years, for example, discussions may focus on basic money management skills with reference to pocket money and introducing concepts such as ‘saving’. When children are studying at university, the emphasis will shift to applying financial concepts such as budgeting and also introducing other ideas such as investment principles.
Expanding the scope
Once your children start their careers, they will require more in-depth knowledge and advice on specific issues such as investing, pensions and taxation. Other topics for discussion may include charitable-giving options, and a range of financial concepts such as mortgages, trusts and Wills.
The final phase usually takes place when your children are in their forties and involves preparing them for financial leadership. This is likely to include discussions about the wealth-transfer process and future plans relating to how family assets are to be divided.
In many ways, today’s youngsters face greater financial challenges than their parents or grandparents. And this increasing burden of financial responsibility inevitably heightens the need to make the transfer of family wealth as smooth and successful as possible.