Keeping the Family Fortune in the Family

For Family Day, we have what some may consider a controversial suggestion for a topic of discussion, in which the entire family can participate: Why not use this weekend to talk about your family’s wealth plan?

Let’s look at the facts: in today’s economic environment, 70 percent of wealthy families will lose their wealth by the second generation. And by the time the third generation comes along, 90 percent of that money will be gone, according to the Williams Group wealth consultancy.

Why? Because, according to a survey by the U.S. Trust, most high-net-worth individuals aren’t preparing the next generation to manage significant wealth. They either believe it’s rude to talk about money (and therefore remain tight-lipped about the family wealth) or they worry that, if their kids really knew what was waiting for them in the will, they wouldn’t take financial decisions seriously. Some respondents were even concerned that the kids might leak the details of the family finances if the information was shared with them.

All of these factors contribute to one harsh reality: Today’s wealthy kids have limited expertise in how to handle money — which brings us back to the importance of Family Day. With the right approach, it is possible for your kids and grandkids to live a comfortable life, but it will require clear communication.

This coming weekend is the ideal time to chat with your children about the family finances. Here’s how to do it:

Move past the discomfort

Most of us have been taught not to discuss money. Financial literacy is an important lesson that everyone must learn — and the earlier the better. If you need help creating a lesson plan, look for free online resources — there are many to choose from. Or reach out to your MNP advisor.

Consider updating your will

To avoid issues, conflicts, rumours and speculation, lay it all out in the open — and break down the reasoning behind your will structure so the entire family understands.

Create a financial roadmap

Inheriting a large sum of money overnight can be daunting, which is why it can be helpful to leave your family with a roadmap. This map should outline your family’s mission statement, your expectations and wishes (in terms of spending, saving and donating) and lessons you learned about building wealth.

Like many parent-child conversations, the “money talk” comes with its fair share of discomfort — at first. The more you talk about it, the more normalized it becomes. This is why turning the talking into a Family Day tradition just makes sense.

If you’d like to learn more strategies for preserving your family fortune, contact an MNP Business Advisor near you.