For many generations, it was taboo to speak about money in front of others, especially children. Children were supposed to be “seen” and not “heard” in the company of family and friends. Times have changed and so has the attitude in regard to how involved children are in family decisions. Most of us center our whole universe around our children, so it is only natural that we should educate them on the expectations and responsibilities involved with family wealth.
It should be noted that preparing children for wealth transfer goes beyond having a sophisticated will, financial plan or estate plan. Estate plans, although extremely important, are usually merely the mechanism used to transfer ownership of assets to heirs. The wealth transfer goal should include guiding principles to assist heirs to maintain and grow their inheritances. Statistically, heirs lose the family wealth by the third generation and only 30 percent of family businesses make it to the second generation. Family financial goals, visions and values are obviously not being transferred to the next generations.
It is never too young to begin wealth education with your children. The first time children learn to manage money is usually through an allowance. Once the amount is established for an allowance, talk about the goals that have been discussed and practice these skills with their allowance. They will learn how to save their money, budget it for things they may want, or give a portion to charity.
The next step in the process of educating your children is to have a family meeting where all participants are invited. This would be the opportunity to be completely open and honest and to discuss your family values. After defining your family values, develop a Family Mission Statement with input from all the family members that would be affected by the family wealth. The suggested age for the youngest child to become involved in the family discussions would be between the ages of 10 and 12.
There are three important goals to consider when discussing financial education with your children:
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