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Generational Wealth: Legacy Through Literacy

It is estimated that 70% of wealthy families will lose their wealth by the second generation, and furthermore, 90% will lose it by the third generation according to a 2018 NASDAQ article. From an outside perspective, it seems easy to assume that people are just bad with money. There may be some truth there, especially if they didn’t know how to manage their assets in the first place, but the truth is, there is a greater disservice at play. Money, in our personal lifetime, is temporary. For those who want to create a lasting legacy and set up success for family wealth years to come, let’s dive in to what we really need to pass on.

I have worked with clients in the past that make it a focal point to pass on money to their kids so that they can create a lasting financial legacy. This is a sentiment I find pretty common with parents, or even individuals, that may have family members they’d like to support when they pass away. However, passing money down to heirs isn’t the only thing that needs to be passed down if you are looking at generational wealth. Wealth of knowledge is arguably more important in this case. Money itself can be a Band-Aid for an individual’s current living situation, but in order to transcend generations, you will also need to make sure you instill appropriate money values and management skills in the person(s) to which you will be passing your wealth. Where should you start? Let’s go back to a common trend in finance: Start Early! This isn’t just with saving but with educating as well. Teach your inheritors why to save, how to save, where to save, and how to make sure their saving habits match up with their goals. If you wait too long to educate your heirs, then you can run into a situation where they are left in the dark. They won’t know what they’re managing or how to manage it. Even if they look for professional help, they may not know how to identify the right person to work with, and this can be dangerous. Educate early and continue to educate because the financial landscape is constantly changing.


Another piece I will touch on is communication. For whatever reason, finance, money and estate planning are taboo to talk about. We don’t want people knowing how much money we have, or what we’re doing with our money. This is all well and good, but if you are looking to pass on a legacy, you need to be transparent with what’s going on so that when the next generation takes over, they can continue to thrive at the same level or greater than you left it. You don’t have to go public with the information, but those that will be your heirs should understand the procedures for your assets, how things have gotten to where they are, and also, where they should continue to trend.

Where do we go from here? Well, that’s up to you. But keep in mind, it’s not just passing on money, it’s about educating individuals to take care of and continue to grow the legacy. At InvestEd, we prioritize financial literacy and if you feel that you could use some help, you are always welcome to attend a seminar or join us here for a complimentary 1 on 1 meeting. We are here to help your situation and if passing on wealth and a legacy is important to you, then it will be important to us.