Inheritance money can be an unexpected windfall for the survivors that can change their lives. Unfortunately, the change may not always be for the best. Most consumers are not prepared for what a sudden increase in wealth can bring. A study conducted by Ohio State’s Center for Human Resource Research for the U.S. Bureau of Labor Statistics suggests that adults who receive an inheritance save only about half of it, while spending, donating, or losing the rest. So how, when, and what do parents teach their children about the wealth that will prevent them from squandering future money? In our society, where consumer messages about spending far outweigh messages about saving or donating, it is never too early to talk with children about the value of money, especially if parents have plans to leave an inheritance behind. Outlined below are financial strategies and tips to pass from one generation to the next:
Determine ‘Financial Personality’ Early
Research shows every person has a money temperament and is inherently a spender, saver, or giver. Discussing money values with your children will help them determine their own financial personality and implement goals over time that work best with these “traits.” For spenders, it’s important to set up concrete goals regarding saving levels. However, the goals initially may need to be more short-term in nature, so the “spender” gets some satisfaction of purchasing items as opposed to a person who is inherently a saver. On the other end of the spectrum, savers don’t typically need instant gratification of a purchase. They get more comfort seeing their account values grow. With this in mind, long-term goals should be created that allow the saver to increase funds, while realizing it’s also acceptable to spend at times.
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