How to talk about money with the next generation
Did you know that people find money such a taboo topic that they’d rather talk about anything else? Recent research shows that people would rather discuss tricky subjects such as politics, religion and sex than have a conversation with their loved ones about their financial situation.
However, discussing your financial plans – especially if you’re able to leave a significant sum to your loved ones – can benefit everyone. Not only can it give you additional peace of mind, but it can also help those on the receiving end develop a positive approach to managing money.
Here are some reasons why having those conversations could be useful for everyone.
Origin stories
We’re taught from a young age that talking about money is crass, or that it can be seen as boastful and tactless. So sitting down with your loved ones and talking about what you plan to do with your money is often a conversation that people put off.
It can also be upsetting. The subject of inheritance is naturally connected to the idea of death – another great taboo – so family may find hearing about your Will and your plans for your money distressing.
In some instances, sadly, greed can be an issue too. There are cases where family members, desperate to secure the lion’s share, dominate conversations about money, leaving others with little understanding of the reasons behind inheritance plans.
However, explaining where the money has come from and why it’s being given can make a significant difference. It helps those receiving an inheritance relate to it on a deeper level and encourages them to think about the reasons you’re passing it on. Sharing these stories can also create a sense of connection and ensure that the inheritance is seen not just as a sum of money, but as part of a meaningful legacy.
A practical understanding
No-one wants to attach a string of conditions about how their money will be used, but talking about how you’d like your family to benefit from it can be important. It may also help equip them to handle their new wealth, which may be overwhelming for some.
Back in the 1930s, Barbara Hutton – whose grandfather founded Woolworths and whose father made a fortune in finance – inherited $50m (the equivalent of over $900 million today). Barbara was, in modern parlance, a shopaholic. Consequently, thanks to her love of haute couture, fine jewellery, and works of art (including pieces rumoured to have been owned by Marie Antionette), she burned through her fortune at an alarming rate and died virtually penniless.
Stories like this can make for worrying reading (and may explain why celebrities such as Sting and Daniel Craig reportedly don’t plan to leave their fortunes to their children). We want the next generation – and beyond – to benefit from our hard work and investments, not end up worse off because of their inheritance.
Of course, sometimes an inheritance can make a positive difference. One notable example of this is the conductor Sir Thomas Beecham (whose grandfather founded the Beechams pharmaceutical company) and who used his inheritance to finance a number of operas in the early 1900s.
Talking openly about your money, your values and how you’d like to people to benefit from it can help others take a more pragmatic approach to how they handle it. Discussing things like budgeting, saving, and the importance of having an emergency fund can all help. Outlining the benefits of insurance and Wills to safeguard their financial future can be useful too.
There are even financial planning structures such as trusts that allow funds to be accessed stages that can help younger beneficiaries avoid the pitfalls of receiving a large sum all at once.
This is why talking to your family about how to handle their finances, especially if they’re younger and perhaps not used to having large sums of money, can be so helpful. The goal is for your family to be able to enjoy the money, but also be able to benefit from it long-term.
Even if you were to follow all the points above, money is still an emotional and sensitive topic. This is where bringing in an impartial expert to guide and facilitate the conversation can help make things easier.
If you’d like objective support when you have those conversations, please let me know, as this is an area I often help people with. By guiding these sensitive discussions, I can make them easier and more productive, ensuring that your intentions are understood and your legacy is something your loved ones truly value – and can enjoy.