It can be uncomfortable for parents to discuss inheritance details with their children. Talking about money in general tends to be difficult for most people, but it can be especially challenging to talk about with your children. Will they understand where the money is coming from? Do they have experience managing money? What sort of effect could a sudden influx of cash have on them?
Whether you’re making your own estate plans or administering an inheritance on behalf of a parent, gifting children or young people large sums of money will certainly impact them. That’s why it’s important to talk about money and inheritance with your children, however, having this discussion can be a double-edged sword. On the one hand, not discussing inheritance with your child can leave them unprepared to handle it when they’re suddenly gifted a lot of money. On the other, telling your child how much they are expected to inherit can come with its own set of negative consequences.
Here are a few things you can do to ensure your discussion is as positive and productive as possible.
Stress That Money Isn’t Inherently “Good”
Right away, it’s important for young people to understand that money, or accumulating money, should never be the goal in life; money is simply a tool that can help us navigate to our true goals. A person isn’t good or bad because of how much money they have; it’s about who they are as a person and what they do with that money.
If a grandparent has passed away, ask your child to think about their favorite memories with that grandparent. Ask them to think about why they loved their grandma or grandpa. Chances are their answer won’t have anything to do with money.
Emphasize Your Values
Building off the previous point, make sure you emphasize your values. As your family accumulated wealth, you likely worked hard, made sacrifices, and even got a little lucky. Your wealth wasn’t given; it was earned.
Make sure your child knows that your family got to where you are today because of your work ethic. Sometimes, when kids understand how wealthy their family is, it can leave them feeling complacent. They know that their family has money, and they’ll likely not need to work hard to live a comfortable life. They’ve always been wealthy, so they assume they’ll always be wealthy. The same is possible when it comes to an inheritance. If a child knows they will be receiving a large sum of money, they might not push themselves to work hard because they know that inheritance can bail them out in times of need.
Additionally, it could “stunt” the child’s development. Expecting an inheritance can make the child put their life on pause as they essentially wait for a large chunk of money to fall in their lap. They could rely too much on this sudden influx of wealth that might not actually appear. With a solid work ethic, your children will be better suited to handle it in case anything like this does happen.
Focus on the Essentials
Young people—whether they’re adolescents or young adults—often don’t have the best grasp on the value of money. They don’t understand the wonderful opportunity an inheritance could be. It’s not uncommon for young people with an inheritance to squander it on something needless or inessential. That new sports car might seem like a lot of fun, but is it necessary?
Help your child focus on the essentials. What are things they need, and what are things they simply want? Distinguishing between the two can make the inheritance last much longer. It’s okay to have some fun with your money, but fun doesn’t last. Try to help them see the big picture. Explain bank accounts and investments to them. If they’re savvy enough, their inheritance could kickstart a lifetime of saving and accumulating.
Be a Positive Example
You can rant and rave to your children about money until your face turns blue, but if you don’t practice what you preach, none of it will stick. If you want your children to be smart with their inheritance and have a positive relationship with money, then you need to be a positive example for them. Think about the financial legacy that you want to leave behind. Live out the above strategies on a daily basis. If you lead by example, your children will pick up on it.
We understand that it can be tricky to talk to your kids about money and inheritance. It’s a sensitive subject, and everyone’s situation is different. If you’re ever looking for more information on how to have better money conversations with your kids, don’t hesitate to reach out to the specialists at Wealth Enhancement Group.
