Sound financial planning isn't just about budgeting, retirement planning, estate planning, business succession planning, investment planning, philanthropy and minimizing taxes. Many of our clients major concern is their children's ability to handle substantial sums of money that they will inherit one day.
Ideally, inherited wealth will provide heirs with important career opportunities and foster a sense of social mission. Unfortunately, all too often the financial free ride of a hefty inheritance only produces Trust Babies -- encouraging sloth and self-indulgence. The missing factor: a healthy dose of Financial Parenting!
Why "Financial Parenting"?
The current state of financial literacy among children is startling. The statistics surrounding rampant spending, credit card debt and bankruptcy among young adults makes it clear they are not prepared to effectively deal with their finances. The good news is that research by the National Endowment for Financial Education (NEFE) has shown that as little as 10 hours of personal financial education positively affects spending and savings habits.
Financial Parenting is the process of educating children/grandchildren on the financial and social responsibilities that come with money. It's important to start the educational process early in life; helping the children/grandchildren become familiar with managing money they will earn or inherit someday.
Yet, too often, parents don't give their children lessons in the financial "facts of life." This lack of communication may be the result of: time constraints, privacy concerns, geographic separation of family members, and just not knowing how to get started.
Weighing Your Options
There is no "right way" to educate and develop financial or social acumen in your children. But critical factors include starting early; emphasizing hands-on experiences; and selecting activities in which the children/grandchildren have an interest.
As with any teaching tool, Financial Parenting requires sensitivity to the needs and personalities of each family member. By focusing on your family's value system you will be able to weigh the potential advantages and disadvantages carefully.
To help our clients with Financial Parenting, we created a workshop, Money Talks: Making it Say the Right Thingssm. This presentation was created through the collaborative efforts of experts - both researchers and academicians - who deal with the subject of money daily.
What's so special about the Money Talks: Making it Say the Right Thingssm workshop is that it was designed to help affluent parents and grandparents make a difference in their children's or grandchildren's financial future through values-based financial behavior.
Here is some of what's covered during the workshop:
Living with Affluence - Appreciating the benefits of affluence and understanding its challenges.
The Financial Life Cycle - Teaching children the skills of money management. In this area we review the ages and stages of financial apprenticeship.
Putting Theory Into Practice: The Allowance - Using an allowance to help children develop money management skill.
Family Matters: The Adult Child - Helping adult children assume greater financial responsibility and independence. Consider employing older children in your office or family business.
The Philanthropic Family - Engaging your family in conversation about the importance of "giving back" and the actions you could be taking.
Wealth: From Generation to Generation - Preparing future generations for the responsibilities associated with inherited wealth. Consideration of incentive provisions in your trust documents.
Wealth and Your Family - Understanding and articulating your own financial values to create a unified family financial vision.
A valuable follow-up to the information we share at the workshop is our Money Talks: Making it Say the Right Things workbook. It contains simple exercises designed to help families of affluence identify, clarify and exemplify their financial goals and values. Our clients find the workbook to be compelling, interesting and instructive.
It is our hope that incorporating Financial Parenting into your financial plan will serve as a catalyst for a lifetime of conversation with children about money that will lead to their financial independence and fiscal responsibility.