Empowering the Next Generation

by Marguerite Weese | Jan 4, 2018
Empowering the Next Generation ...From the Pages of South Jersey Biz...
Many successful parents worry that sharing details about their family’s finances with their children may reduce their motivation later in life. Keeping children in the dark about family wealth can do more harm than good, however. When money matters are discussed openly and financial education begins early, you have a better chance of raising responsible young adults. How do you teach your children about money without overwhelming them or revealing more than you would like about family finances? Young adults don’t need to know the exact value of family assets to learn the basics of managing money responsibly. To get started, outline the concepts you want them to learn. You might wish to include the following:
Financial planning
Developing financial planning skills early will help your children make responsible decisions about spending and saving as they grow older. This is as true for wealthy families as it is for any family, but there are differences. While individuals from families of modest means may base spending decisions on their financial resources, those from more affluent families with seemingly limitless resources may have difficulty deciding how much spending is appropriate. Consider consulting with a financial advisor to draw up a first financial plan for your children.
Investing fundamentals
A good place to begin an investing discussion is with an explanation of the three basic asset classes—stocks, bonds and cash—and the concept of asset allocation. As your children become familiar with these topics, you can introduce more complex investment strategies such as hedge funds and derivatives. Consider sharing some basic information about the structure of your family’s portfolio.
Estate planning basics
Because most estate plans include trusts, you should include this in your financial discussions with your kids. A young adult should understand that a trust is an instrument created by a grantor (often parents or grandparents) and held by a trustee (often a financial institution) for a beneficiary (often children or grandchildren). To make this conversation relevant, you might begin by discussing the structure of any trust vehicles for which your children may be beneficiaries. If you wish to explain different types of trusts—such as dynasty or charitable trusts—it’s a good idea to bring in advisors who can assist with the discussion.
It is crucial to communicate the importance of tax-efficient wealth management including the fact that the tax law landscape is ever changing. You can teach young adults about the investment strategies and trust vehicles that exist to help protect capital from erosion caused by taxes. Additionally, you might wish to explain recent changes in tax rates for earned income, capital gains, dividends and estates.
Legal concepts
It is imperative that affluent young adults understand the concept and importance of prenuptial agreements. It is easiest to have this conversation before a grown child meets his or her future spouse. Young adults should understand other basic contracts, such as partnership agreements for business ventures, especially if you have a family business.
Although philanthropy is much more than a financial topic, it is important for your children to understand the tax benefits for giving and how philanthropy can be an integral part of estate planning. Affluent families might consider inviting their children to help lead the family’s philanthropic efforts. If you have a private family foundation, consider asking your children to sit on the board. This can also be a great way to pass on family values and help them develop leadership skills.
Getting started


If your children are still living at home, you should start addressing these topics now. If adult children are living on their own, consider scheduling a family meeting or retreat with financial advisors. This gives you an opportunity to get together and allows younger family members to meet family advisors in a relaxed setting. These conversations will be most successful when tailored to the age, interests and knowledge of each child, and they can build trust and strengthen familial bonds.

Published (and copyrighted) in South Jersey Biz, Volume 7, Issue 8 (August, 2017). 

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Author: Marguerite Weese


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