How to Keep Your Children Financially Grounded

Many parents worry about how to approach the issue of wealth with their children and keep them grounded. If you are a first-generation wealth creator, you may have concerns about how your children will handle their fortunate circumstances. While keeping your wealth a secret may seem like a solution, an open and honest dialogue is the best approach.

Discuss

Before talking to your children, consider your values and concerns, define what your wealth means to you, and be clear on how much you want your children to benefit, when, and for what purpose. A trusted advisor can offer objective opinions at this stage and document the outputs.

Educate

The discussion should focus on education and learning the value of money — how to earn it, save it and spend it wisely. Help your children establish their financial goals and plans for achieving them. Emphasize the importance of planning and budgeting to achieve their goals.

Involve the children in decisions about larger sums of money to which they don’t have immediate access, like a Junior Isa or a pension. Your children can participate in annual reviews with your advisers, exposing them to different methods of saving, possible associated risks and the application of longer-term investment strategies.

Review

As your children age and their circumstances change, it is essential to review your approach. You may find that your fears of a spendthrift beneficiary frittering away their inheritance subside over time. You may also reach milestones at which you are happy to provide financial assistance.

A well-written will can ensure your wishes are followed in the event of your passing. You can also consider establishing a family trust or family company, useful dynastical vehicles to protect the wealth for future generations.

Related Facts

• The average inheritance in the UK is around £125,000.
• 40% of people who inherit wealth lose it, according to a study by Williams Group Wealth Consultancy.
• Parents should introduce the value and the role of money when children are as young as five.

Key Takeaway

To keep your children financially grounded, start with discussing your values and goals, educating your children about financial planning, and regularly reviewing your approach.

Conclusion

Discussing wealth with your children can be a daunting prospect, but an honest and open conversation is the best approach. Education and planning can help your children avoid the pitfalls of excessive spending. With careful consideration and guidance, your children can learn how to handle their wealth and make it work for them.