The Verus Team

Preserving Your Wealth and Legacy by Educating Your Kids

Written by: Derek Majkowski. Any opinions are those of Derek Majkowski and not necessarily those of RJFS or Raymond James.

Over the next several decades, it is anticipated that as much as $30 trillion will transfer from the wealthiest generation in US history to Gen X and millennial children.  That is a lot of money, and a lot of change and preparation for all involved. 

For many people who are retired or approaching retirement, thoughts generally shift from growing assets to that of distributing or passing assets on to causes or family members – most often our children.  With regards to passing assets onto children or the next generation, we have found through counselling and conversations we have with clients, many questions and concerns arise.

After having spent years of investing and building wealth, often parents are left with asking simply if their children are ready to assume the responsibility.  Will they know what to do with the money and managing it over their lifetime?  Are they educated in the tools, products, and investment vehicles that are available?  Do they know how to organize, prioritize, and implement a financial plan?  Do they understand risk, or the things that can cost them?  Do they have a professional or planner to turn to for advice?  Do they deserve the inheritance?

While these are personal and specific to each case we encounter, and certainly one needs to take into account the ages, personalities and capacities of all parties involved.  We believe contemplating and addressing these questions in detail, can be a valuable exercise – and the lessons can start even before someone reaches retirement, or is considering their legacy.  It can start when your kids are young and you are not yet near retirement.

As a parent myself, my wife and I are constantly balancing that instinctive desire to protect and take care of our two children’s every need and want, with trying to educate them in multiple ways to be thoughtfully equipped and prepared for the world they are entering.  There is at times a fine line between helping and teaching with that of spoiling and enabling.  We are constantly navigating the world or reinforcement, rewards, and sometimes tough decisions and even punishment.

All parents start out with certain expectations and desires as to who they hope their children will become as people, but also realize there are only so many things we can truly control.  It’s my opinion that our best chance at some modicum of success as parents is to provide a balance of perpetual and flexible nurturing, education, and exposure to real life experience.  Then we monitor and adjust from that point.

Recognizing I am simplifying something much more complex when it comes to parenting, most parents can relate to these basic values with most things, except – for some reason - their money and family wealth.  Why is that?

Why are we comfortable engaging our children in certain experiences and not others?  We would never expect to hand the keys to the car over without some training, practice, and behind the wheel experience.

How is handling money any different?  Let alone potentially handling an amount significantly more than anything they had been accustomed to previously.  While there are tools available like wills and trusts that can provide instruction and direction on the maintenance and future handling of one’s assets, most beneficiaries are either ill equipped or feel like they just won the lottery.  

When one reflects on all that goes into building and preserving your wealth, as well as all that goes into raising and launching a child, why would there not be a strategy to thoughtfully connect the two?  They both represent our legacy in some fashion, and we believe some attention should be spent on either a successful well-informed transition, or a clear and defined plan that involves everyone, on what will happen when you can no longer be their parent.

The parent – child relationship involves the full spectrum of emotions, and is a life long journey of lessons, rewards, and at times punishments.  Open and honest communication serves an important role in those relationships, and exposing children sooner rather than later to investing and planning should serve well in securing and enhancing one’s legacy.  

Start small.  Teach your children about basic banking accounts.  Involve them in the process with their education savings accounts.  Open a custodial investment account and teach them about stocks and bonds.  Let them understand the pain of losing money in the market, and the joy of winning.  

Have them talk to your financial advisor when they are getting ready to go to college, or earlier if they are saving up for a big personal purchase.  Have them spend some time once a year with your financial advisor while in college.  

Hopefully that time spent will have them a bit more prepared when they graduate and begin looking for a job.  They’ll need to tackle the managing of their personal expenses and income, and who better to talk with than a 3rd-party professional willing to educate and learn about them.  Especially a professional someone who wants to help them, but also make sure they are prepared for the potential responsibility in the years to come.

Think of how much further along that child will be when they are an adult and they are conditioned to think strategically about saving, spending, investing and planning.  Those would seem to be valuable experiences and important traits to have over the course of their lifetime, and certainly worthy of being both a good steward and representation of someone’s legacy.