7 in 10 families lose their wealth within one generation, and 9 in 10 families lose their wealth within two.

LEARN HOW YOUR FAMILY CAN BEAT THE ODDS

9/14/2022

“Generational wealth” is described as any kind of asset families pass down to children or grandchildren.
Wealth transfers can include real estate, life insurance, cash, stocks, bonds, or even companies.
People who inherit wealth have a significant financial advantage over those that do not. Half a century of research shows that a one decile increase in parental wealth equates with a four percentile increase in offspring wealth, and that grandparental wealth is a unique predictor of grandchildren’s wealth.

However, if the recipients of this wealth are not properly prepared, they can lose it as quickly as they receive it. A 20-year study of 3,200 families conducted by wealth consultancy, The Williams Group, found that seven in 10 families lost their fortunes by the second generation, while nine in 10 lost it by the third generation.

Like the 30% who succeeded, you and your family can beat those odds.
Here’s how:

Create a Family Mission
Your heirs should know what the family’s identified mission about wealth is: what is the mission of your company or your personal investing philosophy? What philanthropic endeavors are important to you? Most importantly, heirs should be given time to practice handling money. Have them attend business meetings if you are passing down a company, meet with your centers of influence,  and begin volunteering at the charity of your choice.

Educate your Children and Grandchildren about Money
Create a foundation now that establishes good financial habits that can last a lifetime. It’s never too soon to start and it can help prevent money problems later in life. Teach heirs to budget their money. When they get an allowance, a gift, or paycheck, help them understand how much they should save, spend, and give to charity. Help them develop an attitude of gratitude so they are thankful for the things they have. Teach by example, modeling financial responsibility, goal setting and saving by sharing your personal experiences with them.

Encourage Entrepreneurship Early
Wealth creators are often succeeded by wealth spenders. Nurture and encourage entrepreneurship early.
Not all children will want to run the same type of business or make the same financial choices you did. But it’s important to set a strong example of hard work, decision-making, and budgeting time and money. If you are passing along a business, have your children come into the office. Let them listen, observe, and explore what their potential role might be.

Here are a few additional tips to help get your heirs ready for their wealth
transfer:

▪ Talk early and often. It is not taboo to talk about money.
▪ Transparently discuss the will with all children ahead of time to avoid family disputes.
▪ Create opportunities to work and save, even at a young age.
▪ Help your heirs look ahead and create a financial plan of their own.
▪ It’s never too early to work with financial advisors, CPAs, and estate attorneys to
strategize about saving, investing, spending goals, and the transfer of wealth.

The Bottom Line

Although this news can be discouraging if you have saved a substantial sum for your future heirs, not all hope is lost.  Following some of the aforementioned tips in addition to having a long-term generational wealth plan can help increase the probability of your success and create a lasting legacy.

Disclaimer

This article is intended for informational purposes only, and should not be considered financial, investment, business, tax, or legal advice. You should consult a relevant professional before making any major decisions.