5 money management lessons for your heirs


Want to teach the next generation to be fiscally responsible and prepare them for the challenges of wealth? Communication is key.

“About 70 percent of wealth transfer plans fail in part because of a lack of communication,” explains Carolann Grieve, managing director and a member of our Truist Wealth GenSpring team. “We’ll talk about sex with our children before we’ll talk about money. But it’s really important to keep those lines of communication open and to actually prepare your heirs long before they come into an inheritance.”

The following are a few important lessons that wealthy families can pass on to future generations to foster better money management skills:

Set goals.

Grieve recommends that benefactors start by talking to their heirs about the family’s history, values and shared mission—in short, what the family wants its wealth to accomplish. “Be inclusive. Everyone’s opinions, values, and perspectives should be welcomed and discussed,” she advises. “There needs to be openness. If your heirs don’t feel engaged and heard, the conversation isn’t going anywhere.”

Older generations can also learn a great deal from younger generations. “Generational learning should be bidirectional and not just pushed down from the upper generations,” Grieve adds.

Spend responsibly.

One of the most powerful ways to teach your kids sound money management skills is by sharing with them some of your financial mistakes over the years. “It’s really important to make sure you’re not just talking about your successes,” explains Grieve. “There’s value in showing that you too have made mistakes along the way but have learned from them.” Another useful approach is to talk to your heirs about the two or three things about managing money you wish someone had told you when you were first starting out.

For smaller children and young adults, start with teaching them how to budget smaller amounts of money. Children as young as 5 can learn about splitting their allowances into separate jars for spending, saving, investing and giving.

Young adults should also be encouraged to get jobs to gain experience with earning and managing their own money. “Going out and working helps build self-confidence and teaches kids a lesson they can’t be taught any other way,” adds Grieve. “People who set goals and strive for them tend to be happier and more successful.”

Diversify your wealth.

Diversification just may be one of the most vital investment lessons you can teach your heirs. Talk to them about concepts such as their appetite for risk and what dollar amount they would feel comfortable losing; how their timetable for investing will influence the risk they can take on; and the importance of having different types of asset classes in their portfolio to help smooth out the ups and downs.

“It’s a great topic to involve your wealth advisor in the conversation,” suggests Grieve. “They can walk your family through the various considerations in a way that’s simple and engaging.”

Talk about estate planning and taxes.

These are two topics that rarely get discussed within wealthy families. Even though the older generation tends to become intimately familiar with both as they plan their legacy, many in the younger generation never realize that it’s precisely because their parents engaged in extensive estate and tax planning that their inheritance is so large.

“The younger generation needs to understand that the government can take up to 40 percent of their assets when they die,” Grieve cautions. “The sooner they start planning for that day, the more options they’ll have available to them.” Good estate planning, and the professionals who provide it, can help reduce the impact of estate taxes, and enhance the legacy they one day leave for their own children.

Don't wait.

Most importantly—don’t be afraid to talk with your heirs about wealth. “If you don’t talk to them, they’ll think that you don’t trust them,” advises Grieve. “Don’t avoid or shut down difficult questions, either. If you do, it will send the message that this is a topic they can never talk about with you.”

Take time in advance to think about what questions you expect they may ask about, and prepare how you want to answer. But keep the lines of communication open. If your heirs can’t talk with you, they will go somewhere else for advice—or simply make decisions on their own.

Whatever you do, don’t let fear of discussing your wealth keep you from providing critical guidance that can better prepare your children for the challenges of wealth.

Interested in learning more about estate planning and wealth transfer? 

Talk to a Truist Wealth advisor.