Generational Wealth Transfer

Preparing the successors for sustainable intergenerational wealth management 

It’s back to school season all across the U.S., the time to get back into routines and more structured schedules. It also can present teachable moments for families, who might use the school calendar to motivate activities focused on finance, specifically around the topics of intergenerational wealth, stewardship, their role in the estate and the family business.

Surprisingly, personal finance classes are not as prevalent in our school system as we might hope. Currently, only 30 states require schools to offer personal finance classes in high school. However, of the 30, only 17 states at present actually require that a course be completed prior to graduating. That leaves responsibility to parents and grandparents to discuss intergenerational wealth with children, teens and young adults. As children of all ages head back to school, it can be an ideal time to involve them in financial discussions and model good stewardship and decision-making, fostering a sense of responsibility and empowerment around family wealth. 

Once you have determined that it’s time to begin having discussions with the younger members of your family about how to build intergenerational wealth, “It’s essential to take into consideration the personalities of your family members and how familiar they already are with the status of your wealth, “ says Whittier Trust Senior VP, Client Advisor, Kim Frasca-Delaney. For the high net worth families who are Whittier Trust clients, there are myriad resources at their disposal to help with these age-appropriate discussions.  

Ready to get started? Here are some activities and ideas that can make the topic of intergenerational wealth approachable no matter the ages involved. 

Little ones: Age-appropriate discussions about generational wealth 

For younger, elementary school-age children, begin with simple activities such as tracking what is spent while shopping or deciding how to spend on a particular project. This can help model good financial decision-making and stewardship. If you’re in a position to save some money on a particular project, you could give that to the child and help them start an interest-earning savings account. Children can see the money they add accumulate and grow over time. This can spark a discussion about compounding interest and why saving is so important, particularly when it comes to growing wealth. 

This can also be a great time to tell the family’s “story”—sharing details about how the family or ancestors came to acquire what is now generational wealth. It might be information about a grandparent who worked hard to start a business or a great-grandparent who had the courage to immigrate to the United States and saved carefully to give his or her descendants a better future. These bits of family history can be meaningful, teachable moments that showcase good values and financial responsibility. 

Teens: Open discussions about generational wealth transfer

Even in families that have the financial means to provide everything their children need (and want), it can be wise to give them opportunities to rise to the challenge of saving for their personal goals. For pre-teens and teenagers, such discussions may center around saving for college, that first car, or even an upcoming trip they would like to take. Parents who don’t wish to simply hand over funds for a big goal might consider offering to match whatever they save or work for. 

Using both budgeting and the setting of clear financial goals, teens can calculate how much income they will need to reach their stated goal. If the teenager already has college funds set aside by parents or grandparents, this is the perfect opportunity to discuss intergenerational wealth and generational wealth transfer. Actions by previous generations have led to the accumulation of wealth that makes it possible for them to attend college debt-free. It is important that teens understand how the wealth was accumulated and what the expectations are for the stewardship of this generational wealth going forward. 

Young adults: Generational wealth transfer may start to become a reality

As your children or grandchildren make their way through college or into adulthood and the workforce, it’s the perfect time for frank discussions about investment strategy, the family business, philanthropy and even how estate planning can (and should) occur. College age and young adult children should be prepared to be successors for their family legacies and estates, which is at the core of intergenerational wealth. 

Each of these age groups benefit from open lines of communication, leading by example, and even allowing a child to fail or encounter a dilemma. These situations open the door for having a conversation about how wealth is accumulated, how it compounds and the importance of preserving wealth for future generations.