Over the years, we have learned that there is no one-size-fits-all approach when it comes to planning for the next generation. Every family is unique, but one common goal for all families is to see the next generation succeed. Success comes in many forms; for some, it’s providing children or grandchildren with the opportunity to pursue their education to the highest degree, or perhaps helping them achieve the American dream of owning their own home. For those who are fortunate, it may also include leaving a legacy that encourages entrepreneurship and risk-taking once a child has finished their education.
Beyond the financial conversation, when do you start introducing your kids and grandchildren to important concepts like financial responsibility, the value of a dollar, trade-offs, budgeting, and the magic of compounding to develop and further their financial acumen?
We’ve found that education and knowledge are critical, and starting early is key. Some families may have a conversation with their kids once a year, setting up a family financial review and introducing financial topics such as saving, investing, and the time value of money. For some, these family financial meetings may continue well into the adult years.
Start slow and be consistent with the discussions. Opening a basic checking and savings account with a debit card can help the younger generation gain valuable exposure to concepts like balancing a checkbook and understanding how to read their statements. When children are old enough to start earning income, whether through part-time or summer jobs, this can be an appropriate time to discuss taxes and tax withholdings. It’s also a good opportunity to talk about the importance of saving a portion of their earnings. One strategy that some of our clients have used is to match contributions for kids or grandkids to incentivize them to save.
Bringing children into family discussions about financial decisions can also be a powerful tool for understanding the trade-offs of certain choices. While these discussions need to be age-appropriate, they might involve topics like family vacations—should the family splurge and go to Europe this summer, or opt for a camping trip to save more money for a second home or other financial goals? College planning can also spark great discussions—understanding the financial impact of attending a private university versus a less expensive in-state public school, and how these different costs might affect the family. Or, if choosing a more expensive school, having your child share in the responsibility. Introducing and involving the next generation in charitable planning can also have a profound impact, teaching them the importance of giving back to the community and helping those in need.
As we enter a new year, it’s a great time to think about empowering your family and providing the next generation with the tools they need to be successful. If we can assist in facilitating any of these discussions with your family, please let us know.