Preparing for wealth transfer takes more than financial literacy—career education and exploring shared values also are important. And it all can start at a young age.
A strong financial foundation is key to sustaining wealth across generations. But preparing family members through financial literacy and career education helps ensure they can have the knowledge and skills necessary to be effective in managing and growing the family’s wealth and legacy.
Family members can communicate better with their financial team when they understand the basics of investing, taxes, budgeting, and other financial topics. They can also respond more productively to market volatility and make smarter financial choices
David Herritt, head of Truist Wealth’s Center for Family Legacy, refers to this process as preparing the human capital for managing a family’s wealth. He believes that shifting the primary focus from what a family owns to the alues the family shares is vital to successful wealth transfers. A wealth transfer is also more meaningful when all family members feel empowered to make financial decisions.
Wealth thrives on human and intellectual capital
Although financial literacy is key to wealth management, your children also need to feel connected to the family’s wealth. So Emily Haenselman, the Center for Family Legacy’s director of family education, says it’s important to prepare them by creating positive connections to previous generations and identifying shared values.
“Traditionally, important financial conversations happen with just the matriarch or the patriarch—the ones who generate the wealth,” Haenselman says. But families should encourage younger generations to have a voice in the family’s legacy and talk about their goals, too.
Involving younger generations in identifying values, drafting a family mission statement, and understanding the source of your wealth builds unity and helps all members envision a shared purpose. Once your family is invested in a shared purpose , and they understand how their values can influence the family legacy, it may be easier for them to expand their financial literacy and more fully understand their responsibilities.
How purpose defines careers
Career choices can also influence a family’s legacy. When children view a job simply as a means to make money, their careers can be unfulfilling. Haenselman is excited to see the evolution as younger generations redefine success. She works with teens and young adults to identify their passions so that they can live—and work—with purpose.
“Rather than stepping into a world that’s already laid out for them, they’re setting their own course,” she says.
When your children are creating their own paths, focusing on commonalities as opposed to differences can help older and younger generations within the family appreciate the values they share. For example, if a child starts a business that’s in a different industry from one the family founded, focusing on the shared value of entrepreneurship allows everyone to focus on what they have in common.
These discussions of shared values shed light on ways that the intent is similar, despite differing execution, and can bring families closer together, Herritt says.
Bill Lyons, director of governance with the Center for Family Legacy adds: “There are times when “young people who are pursuing their passions may not receive a strong economic benefit. But it’s amazing to see families still encourage it and even identify ways to support someone who may be earning less than other family members.”
And when family members have fulfilling careers and feel connected to the family’s values, they’re more likely to be engaged in furthering the family’s legacy.
Have financial talks sooner rather than later
You might be reluctant to have these sorts of discussions when your children are young, but Herritt suggests otherwise.
“A lot of times, older generations are afraid to have those conversations because they don’t think their children are ready,” says Herritt.
Center for Family Legacy advisors believe that having talks about money early and often can make this topic an organic element of family conversation, as opposed to a dreaded subject.
Even young children who may not be ready to tackle financial literacy can benefit from modeled behavior and teachable moments that instill your core values. For example, having open discussions about what is and isn’t in the budget when on vacation are real-life opportunities to provide education. It’s foundational to imparting the ownership mindset your heirs will need to successfully live with wealth now and well into the future.